Cost  of  Railroad  Transportation, 


RAILROAD  ACCOUNTS, 


AND 


Governmental  Regnlation  of  Railroad  Tariffs. 


By   albert    fink, 

VICE-PRES'T   and    GEN'L   SOp't   of   the    LOUISVILLE   t   NASHVILLE 
AND   GREAT   SOUTHERN    RAILROAD. 


EXTRACT  FROM  THE   ANNUAL   REPORT  OF  THE  LOUISVILLE 
df  NASHVILLE  RAILROAD  CO. 


LOUI/SVILLE: 

PRINTED  BY  JOHN  P.  MORTON  AND  COMPANY, 

1875 


CONTENTS. 


PAGE 

Percentage  of  Net  to  Gross  Earnings  no  Criterion  of  Economy.    .4-8 
How  Railroad   Accounts  should   be  kept,  and   Explanation  of 

Tables  of  Annual  Report 8-17 

Classification  of  Operating  Expenses 17-20 

Causes  of  Difference  in  Cost  of  Transportation 20-27 

Comparison  between  Railroad  and  other  Transportation 27-29 

Governmental  Regulation  of  Railroad  Tariffs 29-31 

Principles  upon  which  Railroad  Tariffs  must  be  constructed 32-35 

Just  and  Unjust  Discrimination ....35-40 

Governmental  Railroad  Tariffs  a  Failure 40,  41 

Prevention  of  Extortion  and  Unjust  Discrimination 41,  42 

Contents  of  Tables  of  Annual  Report 42-44 

Estimates  of  the  Value  of  Branch  Roads  to  Main  Line 44-46 

Heading  of  Accounts 47 

Formula  for  Cost  per  Ton-mile 48 


Copy-right  se  lured,  1875. 


I 
RAILROAD  TRANSPORTATION. 


The  length  of  the  roads  operated  during  the  year  is  as  follows : 

Main  Stem 185.00  miles. 

Bardstown  Branch  i7-30       " 

Knoxville  Branch 110.32       " 

Richmond  Branch  3346       " 

Memphis  Line  259.10       " 

Total  length  of  road  owned  by  the  company 605.18       " 

Leased  Roads — Glasgow  Railroad 10.50  miles 

Nashville  &  Decatur  Railroad 122.30  miles 

n2.8o      " 


Total  length  of  road  operated 737-98  miles. 

%  if.  i(.  •!(.  -if.  %  :)(.  iif.  -ifL 

The  following  table  may  be  of  some  interest,  showing  the  number 
of  tons  of  freight  carried  over  the  Main  Stem  and  branches  from 
1865-66  to  1871-72,  and  over  the  Main  Stem,  branches,  and  Memphis 
Line  from  1872-73  to  1873-74;  also  the  gross  revenue,  cost,  and  net 
revenue  per  ton  per  mile,  and  .the  percentage  of  net  to  gross  earnings: 

MAIN  STEM  AND  BRANCHES. 


Year. 


1865-66.. 
1866-67., 
1867-68., 
1868-69., 
1869-70., 
1870-71.. 
1871-72., 


Length 
of  Road- 

Revenue 
per 

Operating 
E.xpenses 

Miles. 

Ton-mile. 

Ton-mile. 

303.10 

5-37 

3-04 

333.30 

4. '3 

2.31 

336.30 

4.23 

2.27 

367.92 

Z-Z^ 

1.74 

381.40 

3.01 

1. 81 

392.45 

2.57 

1. 81 

392.45 

2.30 

1.46 

Profit 

per  Ton  per 

Mile. 


2.33 
1.82 
1.96 

1.57 
I  .20 
0.76 
0.84 


Percentage 
of  Net  to 

Gross 
Earnings. 


43-3 
44.8 

46.3 
47.4 
39.8 
29.5 

36.5 


Ton-miles. 


26,960,849 

27,504,811 
25,190,442 
40,8(3,713 
57,885,740 
71,912,950 
87,642,216 


MAIN  STEM  AND  BRANCHES  AND  MEMPHIS  LINE. 


1872-73., 
1873-74., 


605.75 
605.75 


2.21 
2. II 


1.60 
1. 41 


0.61 
0.70 


27.6 
33.1 


141,649,448 
128,434,191 


From  this  statement  it  appears  that  since  1867-68  there  has  been 
a  constant  increase  in  the  tonnage  until  last  year.     It  also  appears 


RAILROAD  TRANSPORTATION. 


that  during  the  period  embraced  in  this  statement  there  has  been  a 
constant  decrease  in  the  gross  revenue,  operating  expenses,  and  net 
revenue  per  ton-mile. 


PERCENTAGE    OF    NET   TO    GROSS    EARNINGS  NO  CRITERION   OF  ECONOMY. 

The  information  contained  in  this  table  illustrates  the  error  which 
is  often  committed  in  using  the  percentage  of  the  net  to  the  gross 
earnings  as  a  criterion  of  the  economy  with  which  a  railroad  is 
operated. 

In  1865-66  the  net  freight  earnings  were  43.3  per  cent  and  in 
1873-74  only  33.1  per  cent  of  the  gross  earnings.  It  would  be 
erroneous  to  conclude  from  this  that  the  road  was  operated  with  less 
economy  in  the  past  year.  It  will  be  observed  that  the  gross  earnings 
per  ton-mile  in  1865  were  5.37  cents;  in  1874  they  were  only  2. 11 
cents.  Had  the  gross  earnings  per  ton-mile  in  1874  been  the  same 
as  in  1865,  the  net  earnings  would  have  been  74  per  cent  instead 
of  33.1  per  cent  of  the  gross  earnings.  It  would,  however,  be  equally 
erroneous  to  conclude  that  in  1865  less  economy  was  exercised  in  the 
operation  of  the  road  than  in  1874.  The  differences  are  accounted 
for  by  other  reasons.  In  1865  the  bulk  of  the  freight  was  local, 
carried  over  short  distances  of  the  road ;  since  that  time  it  has  become 
mainly  through  business,  which  goes  over  the  whole  length  of  the 
road.  The  latter  is  transacted  at  less  expense.  Since  1865  the 
amount  of  business  on  the  Main  Stem  has  more  than  trebled.  This 
increase  causes  a  reduction  in  the  operating  expenses.  There  is  a 
certain  class  of  operating  expenditures  that  do  not  increase  with  the 
amount  of  business;  they  are  fixed  expenses  which  have  to  be  incurred 
whether  a  small  or  a  large  business  is  transacted.  It  follows  that 
when  only  one  third  of  the  number  of  tons  of  freight  were  moved  in 
1865  as  compared  with  1874,  the  cost  per  ton-mile  for  this  class  of 
expenditures  would  be  three  times  greater  than  in  1874. 

In  order  to  make  a  just  comparison  between  the  economy  of 
operation  in  two  different  years,  it  becomes  necessary  to  take  into 
consideration  the  amount  as  well  as  the  character  of  the  business, 
whether  through  or  local,  and  also  the  cost  of  labor  and  material 
prevailing  during  these  years.  But  even  then  the  comparison  gives 
no  correct  results.  We  have  further  to  discriminate  between  the  ex- 
penditures made  during  one  year  due  to  that  year's  operation,  and  the 


/ 


RAILROAD  TRANSPORTATION.  5 

expenditures  made  due  to  the  operation  of  former  years.  The  expen- 
ditures on  account  of  renewal  of  rails,  cross-ties,  bridges,  rolling-stock, 
etc.,  do  not  always,  I  may  say  hardly  ever,  represent  the  exact  cost 
of  making  good  the  wear  and  tear  caused  by  the  business  of  the  year 
in  which  they  were  incurred.  For  the  first  few  years  of  the  operation 
of  a  new  road,  for  example,  the  expenditures  on  the  accounts  just 
named  would  be  very  small,  and  afterward  they  must  become  corre- 
spondingly large. 

If  we  therefore  fail  to  ascertain  correctly  the  operating  expenses 
for  each  year,  the  net  earnings  as  shown  in  the  annual  reports  for  any 
one  year  do  not  form  a  proper  basis  for  estimating  the  value  of  rail- 
road property.  The  results  of  some  years'  operations  lead  to  hope 
and  others  to  disappointment,  either  of  which  may  not  be  justified 
by  the  facts. 

To  illustrate  this  subject  further,  the  following  estimate  of  the 
expenditures  during  the  year  on  the  Main  Stem  of  the  Louisville  & 
Nashville  Railroad  which  are  not  chargeable  to  last  year's  business  is 
submitted. 

For  Repairs  of  Iron  Rails. — The  gross  ton-miles  moved  over  the 
Main  Stem  during  the  year  were  307,483,718.  Taking  the  average 
number  of  tons  of  iron  worn  out  by  100,000  gross  ton-miles,  as  shown 
in  Table  XIX  (0.95  tons),  the  amount  of  iron  worn  out  by  the  last 
year's  business  was  2,921  tons.  The  actual  cost  of  renewing  this  iron 
will  be,  including  labor. 

At  ;^5o  per  ton 146,050  00 

The  amount  expended  last  year  (Table  II,  items  42-45)  180,735  ^5 

Amount  not  chargeable  to  last  year's  operation  ;5534,685  85 

This  estimate  is  based  upon  the  average  wear  of  iron.  But  there  are 
now  72  miles  of  steel  rails  on  the  Main  Stem:  estimating  their  wear 
at  four  times  that  of  iron  and  the  cost  ^20  per  ton  more,  we  find  that 
instead  of  1,094  tons  of  iron  only  273.5  tons  of  steel  rails  were  worn 
out.     The  difference  in  cost  of  renewal  amounts  to 

1,094  tons  of  iron  at  $50 54,500  00 

273.5  'o"s  of  steel  at  $70 19,145  00 

J?35.35S  00 
Total  amount  overcharged  for  repairs  of  rails  in  1873-74,  $70,240.85. 


RAILROAD  TRANSPORTATION. 


For  Repairs  of  Cross-ties. — The  cost  of  replacing  cross -ties  per 
year  on  the  Main  Stem  since  the  road  was  first  built  has  been,  as 
per  statement  XX,  $257.11  per  mile. 

The  cost  chargeable  to  last  year's  operation  is  185X257. u 47>565  35 

The  amount  actually  expended  on  that  account  was  (Table  II,  item  14)..     68,244  67 


Amount  not  chargeable  to  last  year's  operation  ^20,679  32 

For  Bridge  Repairs. — The  average  cost  of  bridge  repairs  for  the 
last  eight  years  has  been  $141.24  per  mile  per  year.  During  the  past 
year  the  expenditures  on  this  account  were  unusually  heavy,  $250.26 
per  mile.  The  condition  of  the  bridges  is  at  present  such  that  the 
cost  of  repairs  will  hereafter  be  much  less  than  the  average  for  the 
last  eight  years;  but  estimating  it  to  be  the  same,  the  expenses  in- 
curred last  year  were  greater  than  the  average,  185  X  (250.26  — 141.24) 
=  $20,168.70,  and  the  total  amount  for  iron  ties  and  bridges  not 
chargeable  to  last  year's  operation  is  $111,088.87. 

This  large  amount  of  money  expended  during  the  last  year  (as 
well  as  similar  amounts  in  the  two  preceding  years)  was  due  to  the 
operation  of  former  years.  In  the  coming  year,  on  account  of  the 
excellent  condition  in  which  the  road  now  is,  these  expenditures  can 
be  reduced  at  least  to  the  average,  if  not  below  it,  and  large  reduc- 
tions will  be  made  on  account  of  the  reduced  wages  and  cost  of 
material,  so  that  we  may  confidently  expect  larger  net  earnings.  It 
is  fortunate  that  the  heavy  expenditure  required  to  make  good  the 
wear  of  former  years  had  been  incurred  before  the  effects  of  the  panic 
of  1873  upon  the  business  of  the  road  were  felt.  In  the  near  future 
we  must  expect  the  business  of  the  company  to  be  comparatively  light. 
Fortunately  no  heavy  expenditures  will  have  to  be  made. 

It  will  appear  from  what  has  been  said  above  that  it  is  impossible 
to  judge  of  the  economy  of  railroad  operation  from  the  annual  reports 
of  a  railroad  company  for  any  one  year  without  estimating  the  expen- 
ditures that  are  really  due  to  each  year's  operation.  Large  net  earn- 
ings may  be  shown  in  one  and  much  smaller  in  another  year,  yet  the 
road  may  have  been  operated  with  the  same  degree  of  economy  in 
both  years. 

To  make  the  annual  reports  of  a  railroad  company  of  value,  the 
accounts  of  the  company  should  be  so  kept  as  to  show  the  expenses 
due  to  that  year's  operation.     For  that  purpose  an  account  should  be 


RAILROAD  TRANSPORTATION. 


it 


opened  which  might  be  called  "renewal  account,"  and  to  which 
should  be  credited  or  charged  the  difference  between  the  estimated 
cost  of  the  operating  expenses  due  to  the  year's  work  and  the  oper- 
ating expenses  actually  incurred  during  the  year.  This  account  would 
have  to  be  credited  when  the  actual  cost  is  less  and  charged  when  it 
is  more  than  the  estimated  cost.  The  balance  of  this  account  at  the 
end  of  the  year  will  be  a  proper  charge  against  the  revenue  account. 
It  is  true  that  these  balances  can  only  be  estimated ;  but  as  railroad 
tracks,  ties,  bridges,  etc.,  are  never  made  entirely  new  again,  there 
always  will  be  a  certain  amount  charged  to  this  renewal  account  which 
will  represent  the  depreciation  of  the  property,  and  the  owner  of  the 
property  will  have  a  clearer  idea  of  its  value  than  if  no  such  account 
had  been  kept,  although  it  may  not  be  entirely  correct. 

I  have  purposely  pointed  out  the  difficulties  encountered  in  forming 
correct  estimates  of  the  economy  of  railroad  operations,  because,  on 
account  of  the  effects  of  the  general  stagnation  in  business  upon  the 
value  of  railroad  property,  greater  interest  is  felt  in  this  subject  than 
heretofore.  It  is  surprising  to  find  that  so  deceptive  a  criterion  as 
the  percentage  of  operating  expenses  to  gross  revenue  is  still  used  by 
many  intelligent  persons  (among  whom  are  not  only  stockholders, 
but  bankers  and  financiers)  to  judge  of  the  economy  of  railroad 
operations. 

In  addition  to  what  has  been  said  as  to  the  impossibility  of  basing 
any  judgment  upon  such  data,  the  following  table  is  submitted,  which 
shows  the  percentage  of  operating  expenses  to  gross  earnings,  also 
the  revenue  and  cost  per  ton-mile  and  per  passenger  per  mile  on  the 
several  roads  operated  by  the  Louisville  &  Nashville  Railroad  during 
the  year  1873-74: 


ROAD. 


1.  Main  Stem 

2.  Glasgow  Railroad 

3.  Knoxville  Branch 

4.  Bardstown  Branch 

5.  Memphis  Line 

6.  Nashville  &  Decatur  Division. 

7.  Richmond  Branch 


1 

'V 

=  SO" 

H? 

^i.^ 

'So'Ss 

0  < 

S  n 

B-F" 

P  < 

-(  "1  J; 

0  P  = 

32 

T  >!  ni 

si 

n  n  n 

Orq  n 

n 

VI    — 

:  -o 

:    ■"  y 

"v 

1   X 

:    0 
I   "I 

\n^ 

i    n 

Cents. 

Cents. 

Cents. 

63.80 

2.037 

1.32 

3.56 

67.14 

18,064 

8.23 

4.98 

73.09 

2.676 

1.87 

3.63 

75.19 

5.504 

3.72 

3.40 

76.49 

2.014 

1.44 

3.88 

78.38 

2.605 

1.74 

4.13 

101.41 

3.419 

3.91 

3.64 

o 

com  o 
■^2  "  1 


n 


n 


'^  U)   en 

<  3 

:    n   ,    ) 

Cents. 
2.50 


33 
74 

39 
20 

34 
36 


n 


8  RAILROAD  TRANSPORTATION. 

These  seven  roads  from  which  the  above  results  are  obtained  are 
under  the  same  management,  and  whatever  may  be  the  degree  of 
economy  exercised  in  their  operation,  it  is  the  same  on  all;  yet  the 
proportion  of  operating  expenses  to  gross  earnings  vary  from  63.8  to 
101.4  per  centjthe  cost  per  ton-mile  of  freight  from  1.32  to  8.23  cents, 
and  per  passenger  from  2.5  to  4.34  cents. 

HOW    RAILROAD    ACCOUNTS    SHOULD    BE    KEPT,    AND     EXPLANATION    OF 

TABLES    OF   ANNUAL   REPORT. 

If  the  percentage  of  operating  expenses  to  net  earnings,  or  the 
cost  of  one  ton  of  freight  or  one  passenger  transported  one  mile,  can 
not  be  used  as  an  absolute  measure  of  economy,  or  even  as  a  measure 
of  comparison,  and  we  have  seen  it  can  not,  the  question  arises.  What 
is  the  proper  course  to  pursue  in  ascertaining  whether  a  railroad  is 
economically  operated  or  not? 

To  this  the  answer  must  be  given  that  the  only  mode  of  ascer- 
taining this  fact  thoroughly  is  to  make  an  examination  of  each  item 
of  expenditure  incurred  in  the  operation  of  a  railroad,  and  see  whether 
this  has  been  reduced  to  a  minimum  and  the  service  rendered  for 
it  to  a  maximum.  To  make  this  investigation  requires  of  course  a 
thorough  and  practical  knowledge  of  railroad  operations,  of  the  cost 
of  material  and  labor,  of  the  quality  of  the  same,  and  of  the  best 
results  that  can  be  obtained  therefrom.  But  even  that  knowledge 
would  be  of  little  avail  unless  the  accounts  of  the  operating  expen- 
ditures of  railroads  are  kept  in  such  a  manner  as  to  exhibit  in  detail 
not  only  the  expenditures,  but  also  the  amount  of  work  performed 
for  each  item  of  expenditures. 

In  the  annual  reports  of  this  company  I  have  endeavored,  as  far 
as  practicable,  to  present  the  accounts  of  the  expenditures  in  such  a 
manner  and  for  the  purpose  set  forth.  I  propose  to  call  special  atten- 
tion to  the  information  contained  in  this  report,  because  of  the  great 
interest  which  is  now  manifested  in  the  subject  of  railroad  transporta- 
tion, and  the  necessity  that  both  the  owners  of  railroad  property  and 
the  people  should  possess  correct  information  regarding  it. 

The  tables  accompanying  this  report  may  be  divided  into  two 
classes.     The  first  class,  from  Table  I  to  XXV,*  contains  statements  of 

=^=  These  tables  are  published  in  the  Annual  Report  of  the  Louisville  &  Nashville  Railroad 
Company  for  1873-74.  The  "Headings  of  Accounts"  of  tables  II  and  III  are  printed  on  page 
47  in  this  pamphlet,  and  should  be  referred  to  by  the  reader  instead  of  these  tables. 


the  operating  expenses  and  statistical  information  regarding  the  same ; 
the  second  class,  from  XXVI  to  XLV,  contains  statements  of  the 
amount  and  character  of  the  freight  and  passenger  traffic,  with  the 
revenue  derived  therefrom. 

Table  I  contains  in  a  condensed  form,  under  one  hundred  and 
two  heads  for  each  road,  the  general  results  of  the  operation  of  the 
Main  Stem  and  branches  and  leased  lines,  both  as  regards  expenses 
and  revenue. 

Table  II  contains  statements  of  the  operating  expenses  under 
seventy-seven  subaccounts  for  each  road.  The  total  sums  expended 
on  each  account  are  shown  in  this  statement ;  but  from  this  no  opinion 
can  be  formed  as  to  the  economy  or  judiciousness  of  the  expenditure. 
In  order  to  aid  in  analyzing  the  expenditures,  with  the  view  of  forming 
such  an  opinion,  the  following  tables  are  prepared,  showing  the  expen- 
ditures for  certain  units  of  work  performed. 

Table  III  shows  the  expenditures  per  mile  of  road  and  per  train- 
mile.  The  figures  in  the  first  column  designate  the  same  accounts  as 
are  indicated  by  the  same  figures  in  Table  II.  The  items  i  to  29  show 
the  cost  per  mile  of  road  for  maintenance  of  roadway,  buildings, 
general  expenses,  etc. ;  items  30  to  74  the  cost  per  train-mile. 

There  are  some  accounts,  however,  for  which  the  cost  "  per  mile  of 
road  "  or  "per  train-mile"  can  not  be  used  as  a  criterion  of  economy, 
because  the  expenditures  on  these  accounts  are  independent  of  the 
number  of  miles  of  road  operated  or  the  number  of  miles  run  by 
trains.  For  this  reason  it  becomes  necessary  to  present  these  accounts 
in  some  other  manner,  so  that  they  may  show  the  amount  and  character 
of  the  work  done,  as  well  as  the  expenditures  incurred.  The  following 
tables  have  been  prepared  for  that  purpose. 

Table  IV  shows  in  detail  the  expenditures  incurred  at  stations. 
'J'he  total  amounts  expended  were  shown  in  items  30  to  35,  tables  II 
and  III.  The  number  of  tons  of  freight  handled  and  the  cost  per  ton 
at  each  station  are  shown  in  this  table. 

Station  expenses  form  a  very  large  proportion  of  the  operating 
expenses  of  a  railroad,  and  when  their  aggregate  amount  is  only 
known  it  is  impossible  to  tell  whether  this  branch  of  the  business 
was  conducted  with  economy  or  not.  But  by  showing  the  cost  per 
ton  of  freight  handled  a  measure  is  obtained  by  which  a  proper 
check  can  be  put  upon  this  class  of  expenditures.     This,  however,  to 


lo  RAILROAD  TRANSPORTATION. 

be  of  use  has  to  be  done  from  month  to  month,  and  for  that  purpose 
monthly  statements  are  made  out  showing  the  cost  of  conducting  the 
business  at  the  principal  stations. 

Table  V  is  such  a  statement,  showing  the  cost  per  car-load  of 
freight  forwarded  from  and  received  at  Louisville  for  each  of  the 
following  items:  Labor  (loading  and  unloading  freight),  clerks 
(receiving  and  delivering  freight;),  agents,  cashiers,  office-clerks,  and 
watchmen  (general  expense);  yardmen  and  switchmen;  expenses  of 
switching-engines. 

With  close  attention  to  the  management  of  the  business  of  a 
station  for  a  few  months  the  minimum  cost  at  which  freight  can  be 
handled  can  be  readily  ascertained.  This  being  known,  it  requires 
only  some  clerical  labor  in  order  to  obtain  a  check  over  a  very  im- ' 
portant  class  of  expenditures,  amounting  on  the  Main  Stem  of  this 
road  to  about  25  per  cent  of  the  total  operating  expenses,  and  of  such 
a  character  that  very  little  personal  supervision  can  be  exercised  over 
the  same. 

Tables  VI,  VII,  VIII,  and  IX  show  the  cost  of  repairs  of  each 
bridge,  depot-building,  shop-building,  water-station,  and  section-house 
oh  all  the  roads.  The  total  amount  of  expenditures  on  these  accounts 
are  shown  in  Table  II,  items  15  to  19. 

The  expenditures  detailed  in  these  tables  belong  to  that  class  which 
can  not  be  tested  as  to  their  economy  by  using  the  mile  of  road  oper- 
ated or  the  number  of  train-miles  run  over  it  as  a  measure  of  cost. 
Hence  the  cost  of  the  repairs  of  each  individual  structure  is  shown, 
from  which,  with  a  knowledge  of  its  condition  at  the  beginning  and 
at  the  end  of  the  year,  an  opinion  can  be  formed  as  to  the  judicious- 
ness of  the  expenditures.  The  tables  of  course  contain  only  the  total 
amounts  expended  on  each  structure.  When  further  information  is 
desirable  the  books,  which  contain  accounts  in  detail  with  each 
structure,  must  be  consulted. 

While  it  is  comparatively  easy  to  trace  the  expenditures  just 
named,  and  obtain  a  proper  check  over  the  same,  it  is  more  difficult 
to  do  so  with  another  account,  usually  designated  "road  repairs." 

The  work  performed  in  maintaining  the  roadway  and  track  is  of  a 
complicated  character,  and  in  order  to  establish  some  unit  of  measure 
of  cost  and  work  it  becomes  necessary  to  classify  the  expenditures 
according  to  each  special  character  of  work,  and  apply  the  proper 


RAILROAD  TRANSPORTATION.  ii 


measure  to  each  class  separately.  For  that  purpose  the  general  account 
of  road  repairs  has  been  subdivided  in  the  reports  of  this  company  as 
follows  (the  figures  indicate  the  same  accounts  as  those  in  tables  II 
and  III) : 

42.  Cost  of  renewal  of  rails;  number  of  tons  of  rails  used,  and  cost 

per  ton. 

43.  Labor  of  replacing  rails;   number  and  weight  of  rails  replaced, 

and  cost  per  ton. 

44.  Cost  of  hauling  material  for  renewal  of  track ;  tons  of  rails  hauled ; 

cost  per  ton. 

45.  Cost  of  joint-fastenings,  spikes ;  cost  of  same  per  ton  of  new  rails. 

11.  Cost  of  renewal  of  cross-ties;  number  of  ties  used;  cost  per  tie. 

12.  Cost  of  labor  replacing  ties,  per  tie. 

13.  Cost  of  hauling  ties,  per  tie. 

1.  Adjustment  of  track  per  mile  of  road. 
41.  Adjustment  of  track  per  train-mile. 

3.  Ditching  per  mile  of  road. 

2.  Repairs  of  ballast  per  "mile  of  road. 

7.  Repairs  of  road-tools  per  mile  of  road. 

6.  Repairs  of  hand  and  dump-cars  per  mile  of  road. 

9.  General  expenses  of  road  department  per  mile  of  road. 

10.  Extraordinary  repairs,  slides,  per  mile  of  road. 

I  propose  now  to  examine  each  of  these  subaccounts,  and  show 
which  is  the  proper  unit  of  measure  to  be  applied  to  cost  and  work. 

42.  The  cost  of  refiewal  of  rails  varies  with  the  tonnage  passed 
over  the  rails,  the  speed  of  trains,  and  the  quality  of  the  iron.  To 
ascertain  what  should  be  the  wear  of  rails  under  a  certain  usage 
requires  careful  observation  during  many  years  upon  the  different 
classes  of  iron  in  the  track.  The  general  results  obtained  during 
the  last  eighteen  years  on  the  Louisville  &  Nashville  Railroad  have 
been  recorded  in  statement  XIX,  which  will  be  referred  to  hereafter 
more  fully. 

From  this  statement  it  appears  that  on  the  Main  Stem  100,000 
gross  tons  passed  over  one  mile  of  road  wore  out  0.95  tons  of  rail 
(60  lbs.),  while  on  the  Memphis  Branch  the  same  gross  weight  wore 
out  1.5  tons.  On  the  Knoxville  &  Bardstown  branches  no  deduction 
can  as  yet  be  drawn,  as  there  has  not  been  sufficient  wear  of  the 
iron.     The  rails  on  the  Memphis  Branch  were  of  the  tubular  form. 


12  RAILROAD  TRANSPORTATION. 

and  proved  in  comparison  with  those  on  the  Main  Stem  very  infe- 
rior. By  examining  further  the  wear  of  each  particular  brand  of  iron 
under  the  tonnage  we  find  that  of  some  brands  only  0.75  tons  were 
worn  out  by  100,000  tons  of  gross  weight  on  one  mile  of  road,  while 
of  others  1.75  tons,  showing  a  very  great  difference  in  the  quality 
of  iron. 

On  account  of  this  great  inequality  it  is  impossible  to  fix  upon 
any  positive  measure  of  wear  and  predetermine  very  accurately  what 
should  be  the  cost  per  gross  ton-mile  or  per  train-mile  for  repairs  of 
iron.  But,  using  the  average  result  obtained  from  the  experience  of 
many  years,  we  may  at  least  make  approximate  estimates.  The  most 
valuable  use  to  which  the  information  obtained  by  keeping  accurate 
records  of  the  wear  of  iron  inay  be  put  is  to  aid  us  in  selecting  the 
best  quality  of  iron,  to  determine  the  best  mode  of  manufacturing 
it,  and  to  decide  when  it  becomes  advantageous  to  use  steel  rails; 
all  of  which  are  important  questions  in  the  economy  of  railroad 
operation,  which  can  not  be  intelligently  answered  without  such 
information. 

The  amount  of  money  involved  in  selecting  good  or  inferior  iron 
may  be  estimated  on  the  Louisville  &  Nashville  Railroad  as  follows: 
The  total  gross  tonnage  that  passed  over  all  the  roads  operated  by 
this  company  in  the  past  year  was  equal  to  614,882,166  tons  carried 
over  one  mile.  If  the  whole  road  was  laid  with  the  best  iron  that 
we  have  used,  there  would  be  required  per  annum  under  this  tonnage 
4,611  tons  of  iron,  and  if  with  the  most  inferior  iron  which  we  have 
used,  10,760  tons,  a  difference  of  6,148  tons,  which  at  the  present 
low  price  of  iron,  including  labor  of  relaying — say  $50  per  ton  — 
would  amount  to  $307,400. 

The  next  item  of  expense  incurred  in  keeping  a  road  in  repair  is 
the  labor  of  replacing  rails,  the  cost  of  which  can  be  properly  meas- 
ured by  the  number  of  tons  of  new  rails  laid.  The  same  holds  good 
approximately  as  regards  the  cost  of  jomt-fastenings,  spikes,  and  the 
hauling  of  iron.  If  the  minimum  cost  of  these  several  classes  of  work 
is  once  ascertained  by  special  observation,  a  check  over  a  large  amount 
of  expenditure  can  be  readily  established. 

Renewal  of  cross-ties  (items  11,  12,  13,  tables  II  and  III). — The 
average  number  of  ties  in  one  mile  of  road,  the  rate  at  which  they 
decay  per  annum,  the  minimum  cost  of  ties,  labor  of  replacing,  and 


I 


RAILROAD  TRANSPORTATION.  13 

hauling  are  the  principal  elements  which  determine  the  amount  wliich 
should  be  expended  per  year  on  this  account.  The  accounts  of  this 
company  have  been  so  kept  as  to  exhibit  all  this  information.  The 
results  of  the  experience  for  the  last  fifteen  years  regarding  the  dura- 
bility of  ties  and  the  number  required  per  annum,  the  cost  of  labor 
per  tie,  etc.,  have  been  recorded  in  statement  XX. 

Adjustment  of  track  (items  i  and  41,  tables  II  and  III). — In  this 
account  is  charged  the  cost  of  keeping  the  track  in  i)roper  adjustment 
as  regards  line  and  surface,  and  necessarily  includes  the  cost  of  bed- 
ding the  ties  for  the  purpose  of  sustaining  the  rails  in  their  proper 
place.  The  cost  of  this  work  depends  upon  the  nature  of  the  road- 
bed, the  action  of  the  weather,  and  the  amount  and  character  of  the 
traffic.  In  order  to  obtain  a  measure  of  economy  we  have  to  divide 
this  account  into  two  parts,  in  accordance  with  the  cause  which  makes 
the  expenditures  necessary : 

{a)  The  cost  of  bedding  ties  and  adjusting  track,  so  far  as  this 
work  may  be  required,  regardless  of  the  extent  of  the  use  that  is  made 
of  the  road,  depends  on  the  character  of  the  road-bed,  the  influence 
of  climate,  etc.,  and  cost  of  organization  for  the  purpose  of  attending 
to  this  work. 

(^)  The  cost  of  re-adjusting  track  as  far  as  made  necessary  by  the 
passage  of  trains  over  it. 

The  proper  measure  for  the  expenditure  referred  to  under  (a)  is  the 
"mile  of  road,"  and  under  {b)  the  number  of  tons  passed  over  the 
track,  or  approximately  the  number  of  "train-miles."  The  cost  of 
this  work  must  necessarily  differ  on  different  roads.  No  general  rule 
can  be  adopted  that  will  apply  to  all  roads  ;  yet  by  an  observation  for 
several  years  in  each  individual  case  the  minimum  cost  per  mile  of 
road  and  per  train-mile  for  each  class  of  work  may  be  ascertained  and 
used  as  a  check  upon  this  class  of  expenditures. 

In  tables  II  and  III  this  account  (adjustment  of  track)  has  been 
divided  in  accordance  with  the  result  obtained  from  observation  made 
on  this  road  during  the  last  fifteen  years.  The  cost  per  mile  of  road 
is  shown  in  item  i,  tables  II  and  III,  and  the  cost  per  train-mile  in 
item  41. 

The  division  of  this  account  becomes  also  necessary  when  wc 
desire  to  ascertain  the  relations  existing  between  the  cost  of  additional 
tonnage  passing  over  the  road  and  the  cost  that  has  to  be  incurred 


14  RAILROAD  TRANSPORTATION. 


independent  of  the  tonnage — an  important  item  in  estimating  the  cost 
of  transportation. 

3.  Cost  of  ditching  differs  with  the  nature  of  the  soil,  climate, 
and  amount  of  rainfall.  With  observations  extending  over  a  number 
of  years  the  minimum  cost  per  mile  of  road  may  be  approximately 
ascertained  in  each  individual  case,  and  may  be  used  as  a  check  on 
this  class  of  expenditure.  The  same  may  be  said  of  the  cost  of  repairs 
of  ballast  (2),  road-tools  (7),  repairs  of  hand  and  dump-cars  (6),  and 
general  expenses  of  road  department  (9). 

The  cost  of  extraordinary  repairs  includes  the  cost  of  repairing 
damage  to  road-bed  caused  by  freshets,  slides,  etc.  These  are  acci- 
dental causes,  hence  no  measure  can  be  applied  to  this  except  that 
based  upon  experience  for  a  great  number  of  years. 

This  analysis  of  the  various  subaccounts  which  are  usually  com- 
prised under  one  general  account,  called  "road  repairs,"  shows  how 
impossible  it  is  to  apply  to  the  general  account  one  measure — such, 
for  example,  as  the  "mile  of  road"  or  "train-mile" — and  use  it  to 
ascertain  the  economy  with  which  the  work  was  done,  or  to  make 
comparison  between  different  roads.  The  many  elements  of  cost  of 
different  nature  must  be  separately  considered  and  compared.  Thus 
we  could  not  compare  the  cost  of  adjustment  of  track  of  a  mile  of  road 
over  which  forty  trains  pass  with  the  cost  of  a  mile  over  which  only 
one  train  passes  without  separating  the  expenses  incurred  on  account 
of  tonnage  from  those  which  are  independent  of  the  tonnage. 

We  have  now  ascertained  the  various  accounts  from  i  to  46, 
tables  II  and  III,  and  established  proper  measures  that-  can  and 
should  be  applied  to  each,  to  determine  the  judiciousness  of  the 
expenditures.  We  will  now  proceed  to  examine  the  other  accounts 
from  47  to  73. 

Table  XI  shows  the  cost  per  train-mile  and*engine-mile  in  detail 
of  the  following  items  named  in  tables  II  and  III : 

48.  Locomotive  repairs. 

49.  Oil  and  waste  used  on  locomotives. 

50.  Watching  and  cleaning. 

53.  Engineers  and  firemen's  wages. 
63.  Fuel  used  by  locomotives. 

48.  The  cost  of  locomotive  repairs  may  be  measured  approximately 
by  the  mile  run,  yet  it  is  necessary  to  examine  into  the  cost  of  repairs 


! 


RAILROAD  TRANSPORTATION.  15 


of  each  individual  locomotive  in  order  to  determine  the  economy 
with  which  the  work  was  performed.  Detailed  accounts  are  therefore 
kept  with  each  locomotive. 

53.  Engineers  a7id  firemen;  55.  Conductors  and  brakenien. — The 
elements  determining  expenses  on  these  accounts  are  the  wages  paid 
to  each  class  of  employees  per  day,  and  number  of  miles  to  be  run  by 
them  constituting  one  day's  work.  The  total  expenses  under  this 
account  should  not  exceed  the  cost  per  mile  so  ascertained,  multiplied 
by  the  total  number  of  miles  run. 

49  and  (iT)'  Oil  and  waste  and  fuel  used  by  locomotives  can  be 
readily  checked  by  the  number  of  miles  run.  It  is  necessary  to  ascer- 
tain from  direct  observation  the  most  economical  results  that  can  be 
secured  under  existing  conditions,  and  apply  it  as  a  measure  to  the 
whole  year's  work. 

The  expenses  for  fuel  form  so  large  a  portion  of  the  operating 
expenses  of  railroads  that  accurate  accounts  must  be  kept  of  the  con- 
sumption of  each  engine,  and  these  accounts  must  be  balanced  with 
the  total  amount  of  fuel  bought.  Without  such  check  the  detailed 
statement  can  not  be  relied  upon  as  correct.  Inventories  of  the  fuel 
on  hand  are  taken  every  six  riionths,  and  all  the  fuel  bought  is  fully 
accounted  for. 

Table  XII  contains  a  yearly  balance-sheet  of  fuel  account,  in 
which  is  shown  the  amount  of  fuel  bought  and  consumed  during  the 
year,  and  for  what  purpose  used,  cost  of  same,  etc. 

Table  XIII.  Car  repairs. — The  unit  of  comparison  of  this  work 
is  the  number  of  miles  run  by  the  several  classes  of  cars.  This  table 
contains  the  mileage  made  by  each  class  of  cars,  and  cost  of  repairs  per 
mile.  The  expenditures  shown  in  items  66-72  depend  principally  upon 
accidental  causes,  and  no  fixed  measure  of  economy  can  be  adopted 
for  the  same. 

I  have  now  examined  the  several  items  constituting  the  operating 
expenses  of  the  road,  and  in  a  general  way  pointed  out  the  mode  in 
which  the  accounts  should  be  kept  in  order  to  enable  the  managers  to 
obtain  proper  checks  and  control  over  the  expenditures,  and  to  aid 
others  in  the  investigation  of  the  economy  with  which  the  road  has 
been  operated.  There  are  some  additional  tables  attached  to  this 
report  which  give  details  of  expenditure  and  other  statistical  informa- 
tion relating  thereto,  to  which  I  will  now  refer. 


1 6  RAILROAD  TRANSPORTATION. 

Tables  XIV  and  XV  are  balance-sheets  of  the  iron-  and  brass- 
foundry  accounts,  showing  the  amount  of  castings  made,  material 
bought,  cost  of  making  castings,  and  material  and  castings  on  hand 
July  I,  1874. 

Table  XVI  shows  the  operating  expenses  of  the  steamer  "Dick 
Johnson"  on  the  Tennessee  River.  This  steamer  was  put  on  the 
Tennessee  River  to  secure  business  from  that  river  which  we  could 
not  obtain  otherwise,  with  the  view  of  increasing  our  tonnage  in  the 
direction  in  which  it  is  now  lightest,  adding  to  the  revenue  without 
much  additional  expense.  Satisfactory  arrangements  have  been  made 
with  the  E.  &  T.  P.  Co.  to  run  in  connection  with  our  road  after 
July  ist,  and  from  that  time  the  company  will  discontinue  to  operate 
its  own  steamer. 

Table  XVII  shows  in  detail  the  amount  expended  for  new  rolling- 
stock  acquired  during  the  year,  and  for  other  improvements  which 
have  increased  the  value  of  the  road,  and  which  are  not  properly 
chargeable  to  the  operating  account. 

The  following  tables  contain  further  statistical  information. 

Table  XVIII  shows  the  cost  of  road  repairs  per  mile  of  road  and 
per  train-mile  from  the  time  the  roads  named  were  completed  or 
came  into  the  possession  of  this  company  until  the  pfesent  day ;  also 
the  amount  of  new  iron  used  during  each  year. 

Table  XIX  shows  the  cost  of  renewing  iron  on  four  roads  since 
their  construction ;  also  the  number  of  tons  of  gross  weight  due  to 
the  passenger  and  freight  traffic  passed  over  the  iron  since  it  was  laid. 
This  tonnage  is  given  in  three  different  modes:  i.  The  actual  gross 
tonnage  passed  over  the  road,  including  switching  and  construction 
service ;  2.  The  gross  weight  of  passenger  and  freight  revenue-trains 
alone ;  3.  The  gross  weight  of  the  freight  revenue-trains,  and  double 
the  gross  weight  of  the  passenger  revenue-trains.  It  is  presumed,  as 
data  for  comparison,  that  the  wear  of  one  gross  ton  of  a  passenger- 
train  moved  over  the  iron  at  double  the  speed  of  a  freight-train  is 
equal  to  the  wear  of  two  gross  tons  of  a  freight-train.  In  order  to 
ascertain  the  wear  of  iron  by  the  tonnage  passed  over  it  from  the 
time  the  iron  was  new  up  to  the  present  time  it  is  necessary  to  take 
in  account  the  depreciated  condition  of  the  iron  at  present  and  the 
estimated  cost  to  make  the  track  new  again.      These  estimates  are 


RAILROAD  TRANSPORTATION.  17 

shown  in  this  table,  and  the  results  obtained  have  been  referred  to 
before  (page  11). 

Table  XX  shows  the  number  of  cross-ties  used  on  the  various 
roads  since  their  construction  up  to  date,  the  cost  of  same,  the  cost  of 
labor  relaying  and  hauling  per  tie.  It  was  also  necessary  to  make  the 
estimates  of  the  number  of  ties  required  to  make  the  road  new,  as  the 
average  number  of  ties  used  per  year  up  to  this  time  does  not  represent 
the  full  wear  of  the  ties  per  year. 

Table  XXI  shows  the  amount  of  new  iron  laid  during  the  past 
year,  and  quantity  of  each  kind  of  iron  and  steel  in  the  road  on 
July  ist. 

Table  XXII  shows  the  condition  of  the  road-bed  as  regards  ballast. 

Table  XXIII  shows  the  length  of  side-tracks. 

Table  XXIV  shows  the  number  and  kind  of  cars  and  locomotives 
owned  by  the  company. 

Table  XXV  shows  the  value  of  materials  on  hand  July  ist.  This 
is  the  last  table  of  the  report  containing  information  in  regard  to  the 
operating  expenses. 

CLASSIFICATION    OF   OPERATING   EXPENSES. 

Before  leaving  this  subject  attention  is  called  to  the  classification 
of  accounts  in  tables  II  and  III.  It  will  be  observed  that  the  accounts 
are  divided  into  three  classes : 

Maintenance  of  road,  buildings,  and  general  expense,  from 

account  i  to  29. 
Station  expenses,  from  account  30  to  40. 
Movement  expenses,  from  account  41  to  74. 

The  expenditures  of  each  class  bear  a  distinct  character,  to  which 
I  will  now  refer  more  particularly. 

Those  in  the  first  class  are  not  affected  by  the  amount  of  business 
transacted,  within  certain  limits  to  Idb  referred  to  hereafter.  The 
roadway  must  be  kept  in  good  order.  Cross-ties  when  decayed  must 
be  renewed,  bridges  kept  in  repair,  and  a  certain  organization  of 
officers  and  men  must  be  kept  up,  whether  one  or  more  trains  are  to 
pass  over  the  road. 

This  class  of  expenditure  per  mile  of  road  will  vary  on  different 
roads  according  to  the  permanency  of  construction,  the  number  of 


1 8  RAILROAD  TRANSPORTATION. 

bridges  to  be  kept  in  repair,  the  nature  of  the  soil,  the  climate,  and 
many  other  local  conditions.  They  will  also  vary  with  the  amount 
of  business,  but  only  to  the  extent  to  which  an  increase  of  business 
requires  more  extensive  accommodation,  such  as  depot  -  buildings, 
side-tracks,  etc.,  which  have  to  be  kept  in  repair.  On  a  road  with  an 
established  business,  and  having  suitable  accommodation  for  the  same, 
considerable  variation  in  business  may  take  place  without  affecting 
this  class  of  expenditures. 

The  second  class  of  expenditures  are  incurred  at  stations  in  keep- 
ing up  an  organized  force  of  agents,  laborers,  etc.,  for  the  purpose  of 
receiving  and  delivering  freight,  the  selling  of  tickets,  etc. 

One  portion  of  these  expenditures  does  not  vary  with  the  amount 
of  business ;  another  portion  does.  A  certain  number  of  agents  have 
to  be  employed,  whether  there  is  more  or  less  work  to  be  done ;  but 
the  number  of  persons  employed  to  handle  freight  may  be  varied  in 
proportion  to  the  number  of  tons  of  freight  to  be  handled.  This 
whole  class  of  expenditures,  however,  is  entirely  uninfluenced  by  the 
length  that  either  freight  or  passengers  are  hauled,  or,  in  other  words, 
by  the  work  of  transportation  performed.  Freight  or  passengers  may 
be  hauled  five  or  two  hundred  miles,  the  station  expenses  incurred  on 
their  account  being  the  same. 

In  the  third  class  of  expenditures  have  been  collected  all  those 
that  vary  with  the  number  of  trains  run. 

On  roads  on  which  there  is  sufficient  freight  business  to  fill  all 
trains  that  are  run  from  one  terminus  of  the  road  the  amount  of 
freight  transported  will  be  nearly  in  proportion  to  the  number  of 
freight  train-miles ;  and  hence  on  such  roads  this  third  class  of  expen- 
ditures will  be  nearly  in  proportion  to  the  amount  of  business.  It  is 
this  class  of  expenditures  alone  which  possesses  that  characteristic. 

On  roads,  however,  upon  which  freight-trains  have  to  be  run  at 
stated  times,  whether  fully  loaded  or  not,  this  class  of  expenditures 
does  not  vary  with  the  business,  but  very  nearly  with  the  number  of 
trains  run.  The  expenditures  and  amount  of  freight  transported  in 
this  case  are  irrelative,  the  cost  of  transporting  freight  being  dependent 
entirely  upon  the  loads  as  accidentally  offered  for  transportation. 

To  the  three  classes  of  expenditures  just  named,  and  which  have 
been  shown  separately  and  in  detail  in  tables  II  and  III,  must  be 
added  a  fourth,  not  shown  in  these  tables,  but  which  forms  a  large 


RAILROAD  TRANSPORTATION.  19 

proporticm  of   the  total    operating  expenses   of  railroads  —  viz.,  the 
interest  on  the  capital  invested. 

This  class  is  mainly  uninfluenced  by  the  amount  of  work  done. 
Only  so  far  as  an  increase  of  business  involves  the  necessity  of  addi- 
tional investments  for  its  accommodation  is  it  influenced  by  the 
amount  of  business. 

In  the  consideration  of  the  subject  of  the  cost  of  railroad  trans- 
portation it  is  of  the  greatest  importance  to  discriminate  between  the 
expenditures  which  vary  with  the  amount  of  work  performed  and 
those  which  are  entirely  independent  thereof.  The  latter  form  so 
large  a  proportion  of  the  total  operating  expenses  of  railroads  that  it 
becomes  impossible  to  make  the  amount  of  work  performed  a  criterion 
or  measure  of  the  cost. 

The  fixed  or  inevitable  expenses  which  attach  to  the  operation  of 
railroads,  and  which  are  the  same  whether  one  or  many  trains  are  run 
over  a  road,  have  to  be  ascertained  separately  in  each  individual  case. 
These  expenditures  are  in  the  nature  of  a  tax  upon  the  business  of  the 
road  ;  the  smaller  the  business  the  larger  the  tax.  What  the  tax  may 
or  should  be  per  ton  of  freight  or  per  passenger  carried  in  any  one 
case  can  not  be  predetermined  by  any  general  rule  or  law,  but  can 
only  be  ascertained  after  the  two  elements  on  which  it  depends — 
(i)  the  fixed  expenditures,  and  (2)  the  amount  of  work  done — are 
actually  known.  These  elements  vary  on  all  roads ;  it  would  be  a 
singular  accident  to  find  them  alike  on  any  two. 

The  disregard  of  these  facts  in  estimating  the  cost  and  the  value 
of  railroad  transportation  with  a  view  of  judging  of  the  reasonableness 
of  railroad  tariffs  has  led  to  many  erroneous  conclusions,  which  appear 
to  be  now  fixed  in  the  public  mind.  It  is  of  great  importance  to  the 
owners  of  railroad  property  at  this  present  time — more  so  perhaps 
than  heretofore — to  possess  correct  information  upon  the  subject  of 
the  cost  of  railroad  transportation.  It  may  therefore  not  be  considered 
out  of  place  here  to  show  how  the  cost  of  transportation  varies  upon 
the  various  roads  operated  by  the  Louisville  &  Nashville  Railroad,  and 
the  reasons  therefor. 

The  following  table  (A)  shows  the  percentage  of  the  four  classes 
of  expenditure  above  referred  to,  of  the  total'  operating  expenses 
on  the  seven  roads  operated  by  the  Louisville  &  Nashville  Railroad 
Company. 


20 


RAILROAD  TRANSPORTATION. 


TABLE  A. 

M.  S. 

M.  L. 

N.  &D. 

K.  B. 

B.  B. 

R.  B. 

G.  B. 

Movement  expenses 

41.367 
18. 161 

14.453 
26.019 

38.589 
12.924 
17.179 
31.308 

100.000 

38.594 
12.259 

17.554 
31.593 

22.428 

4.367 
17.964 

55-241 

19.490 

6.209 

22.505 

51.796 

100.000 

17-634 

5.832 

17-295 

59-239 

28.761 
5.007 
Q.361 

56.871 

Station  expenses   

Maintenance  of  road 

Interest  on  investment  

Total 

100.000 

100.000 

100.000 

100.000 

100.000 

From  this  table  will  be  seen  the  great  diversity  existing  in  the 
relative  proportions  of  each  class  of  expenditures.  • 

The  move^nent  expenses,  the  cost  of  conveying  freight  from  one 
place  to  another  after  it  is  loaded  in  the  cars — the  transportation 
expenses  proper — are  41.3  per  cent  on  the  Main  Stem,  and  only  17.6 
on  the  Richmond  Branch,  of  the  total  operating  expenses.  We  have 
therefore  in  one  case  5 8. 7,  in  the  other  82.4  per  cent  of  the  total 
operating  expenses,  vi'hich  are  entirely  uninfluenced  by  the  amount  of 
work  performed  as  measured  by  weight  and  distance,  or  ton-miles. 

The  station  expenses  vary  from  4.3  per  cent  on  the  Knoxville 
Branch  to  1 8.1  per  cent  on  the  Main  Stem  of  the  total  operating 
expenses. 

The  cost  of  maintenance  of  road  is  9,3  per  cent  on  the  Glasgow 
Branch,  and  22.5  on  the  Bardstown  Branch. 

The  interest  account  is  26  per  cent  on  the  Main  Stem,  and  59.2 
per  cent  on  the  Richmond  Branch. 

With  such  great  variations  in  the  constituting  elements  of  the  cost 
of  transportation  uniformity  in  the  final  results  can  not  be  expected. 


CAUSES   OF   DIFFERENCE   IN    COST   OF   TRANSPORTATION. 

I  will  now  compare  the  expenditure  of  each  class  per  ton-mile 
on  the  seven  roads,  and  show  more  particularly  the  reasons  for  the 
great  difference  in  cost. 

The  following  table  (B)  shows  each  class  of  operating  expenses  per 
ton-mile  on  the  seven  roads  operated  by  the  L.  &  N.  R.  R.  Co. 

TABLE  B. 


1 

Cost  per  Ton-mile.            !   M.  S. 

M.  L. 

N.  &D. 

K.  B. 

B.  B. 

R.  B.      G.  B. 

Cents. 
.7365 
.3233 
.2573 

Cents. 
.8102 
.2714 
.3607 

Cents. 

-9787 
.3x09 

.4451 

1-7347 
.8011 

2.5358 

Cents. 

.9364 
.1S23 

-7499 

Cents. 

1.5039 

.4791 

1.7366 

3-7196 
3.9968 

7.7164 

Cents.      Cents. 

1.6934   i     5.4928 

.5601    \       .0563 

1.6608        1.7877 

Station  expenses  

Maintenance  of  road 

Total  operating  expenses 

1.3171 

.4633 

I . 7804 

1-4423 
•6574 

2.0997 

1.8686 
2.3061 

3.9143        8.2368 
5.6887      10.8615 

Interest 

Total  oper'g  exp.  and  interest... 

4.1747 

9.6030      19.0983 

RAILROAD  TRANSPORTATION. 


21 


Movement  expenses  (comprised  of  items  41-73,  tables  II  and  III). — 
It  appears  that  on  the  first  four  roads  this  class  of  expenditures  varies 
from  .73  cents  to  .97  cents  per  ton-mile;  on  the  last  three  named  from 
1.50  cents  to  5.49  cents  per  ton-mile.  The  first  four  roads  belong  to 
that  class  on  which  fully  loaded  freight-trains  can  be  started  from  one 
terminus  of  the  road  ;  on  the  last  three  named  trains  are  started  at 
regular  times,  regardless  of  the  amount  of  load  that  is  to  be  carried. 
Hence  we  find  greater  agreement  in  the  cost  of  moving  one  ton  one 
mile  on  the  first  four  roads  than  on  the  latter,  on  which  the  cost 
depends  altogether  upon  accidental  causes. 

If  on  the  first  four  roads  the  grades,  curves,  and  the  cost  of  labor 
and  material  were  the  same,  and  also  the  character  of  the  business, 
then  the  cost  per  ton-mile  should  be  the  same;  but  as  these  elements 
of  cost  differ,  uniformity  in  the  cost  even  in  the  movement  expenses 
can  not  be  expected. 

The  character  of  the  business  of  a  road  has  a  great  influence  upon 
the  cost  of  transportation. 

We  find  the  average  train-loads  carried  on  the  first  four  roads,  and 
the  movement  expenses  per  ton-mile,  as  follows: 


Average  train-loads  tons 

Movement  expenses  per  ton    cents 


M.  S. 

M.  L. 

N.&  D. 

96 
0.97 

135 
0.73 

"3 
0.81 

K.  B. 

77 
0.93 


On  the  Main  Stem  the  average  net  load  carried  per  train  is  nearly 
twice  as  much  as  on  the  Knoxville  Branch. 

On  the  first-named  road  a  large  amount  of  freight  is  carried  over 
its  whole  length;  while  on  the  latter,  which  is  a  mere  local  road,  it 
only  passes  over  a  portion  of  its  whole  length.  The  capacity  of  the 
locomotive  and  train  can  not  therefore  be  as  fully  utilized  on  the  latter 
as  on  the  former  road. 

On  the  Main  Stem  the  tonnage  in  one  direction  is  73  per  cent  of 
the  tonnage  in  the  other  direction,  while  on  the  Knoxville  Branch  it 
is  only  21  per  cent;  hence  more  empty  cars  have  to  be  run  on  the 
latter  than  on  the  former  road. 

The  result  is  that  an  average  of  135  tons  of  freight  is  being  carried 
per  train  on  the  Main  Stem,  while  only  77  tons  can  be  carried  on  the 
Knoxville  Branch;  yet  the  same  attention  is  paid  on  both  roads  to 
secure  maximum  loads  to  each  train. 


2  2  RAILROAD  TRANSPORTATION. 

It  is  the  character  of  the  business  peculiar  to  each  road  that  brings 
about  this  great  difference,  which  of  course  influences  the  cost  of 
transportation. 

On  roads  on  which  there  is  not  sufficient  business  to  secure  full 
loads  to  the  trains  from  one  or  the  other  of  the  terminal  stations  the 
difference  in  the  movement  expenses  per  ton  is  found  still  greater. 

The  following  table  shows  the  average  loads  carried  in  the  trains 
of  the  three  branch  roads,  and  the  cost  per  ton-mile  for  moving  the 
freight  : 

G.  B. 


B.  B. 

R.  B. 

18.2 
1.5 

24.0 
1.7 

Average  number  of  tons  freight  carried  on  one  train 18.2      24.0  4.9 

Movement  expenses  per  ton-mile cents       1.5         1.7  5.5 

It  is  on  account  of  the  small  loads  carried  on  the  Glasgow  Branch 
per  train  (4.9  tons)  that  the  movement  expenses  are  so  much  larger 
than  on  the  other  branches,  on  which  the  trains  carry  from  18.2 
to  24  tons. 

Station  expenses  (items  30-40,  tables  II  and  III). — The  elements 
controlling  the  cost  per  ton-mile  for  station  expenses  are — 

{a)  The  cost  of  handling  one  ton  of  freight — for  loading,  unload- 
ing, clerking,  agents'  salaries,  depot  expenses,  switching,  etc. 

{h)  The  length  of  haul. 

Supposing  that  the  cost  of  handling  freight  per  ton  were  the  same 
on  all  roads  and  at  all  stations  of  a  road,  then  the  cost  per  ton-mile 
of  freight  would  vary  according  to  the  length  of  haul.  For  each 
particular  length  of  haul  there  would  be  a  different  cost  per  ton-mile 
for  this  service. 

By  reference  to  Table  IV  it  will  be  seen  that  the  average  cost  of 
station  expenses  per  ton  of  freight  handled  on  the  Main  Stem  of  the 
road  is  23  cents.  For  freight  that  passes  over  the  whole  length 
of  the  line,  say  between  Louisville  and  Memphis,  the  cost  per  ton- 
mile  would  be  ^3.^-=^o.\2  cents,  and  for  freight  carried  only  five 
miles  it  would  be  ^-"3--^=  9. 2  cents.  We  have  therefore  a  difference 
between  the  cost  per  ton-mile  from  0.12  to  9.2  cents,  although  the 
actual  cost  of  performing  the  work  was  the  same  in  both  cases;  thus 
showing  that  the  ton-mile  is  not  a  proper  unit  of  measure  of  cost  of 
this  service. 

But  there  is  even  considerable  variation  in  the  cost  of  handling 


RAILROAD  TRANSPORTATION.  23 

one  ton  of  freight  at  various  stations,  as  will  appear  from  an  exami- 
nation of  Table  IV,  which  shows  the  station  expenses  per  ton  and  the 
number  of  tons  of  freight  handled  at  each  station.  We  can  ascertain 
from  this  table,  in  connection  with  Table  XXVII,  the  average  cost  per 
ton-mile  of  freight  handled  at  each  station. 

The  latter  table  gives  the  number  of  ton-miles  of  freight  received 
and  forwarded  from  each  station.  Dividing  the  number  of  tons  into 
the  number  of  ton-miles  gives  the  average  haul,  and  dividing  this  into 
the  cost  per  ton  for  handling  gives  the  average  cost  per  ton-mile  for 
handling  freight. 

For  example,  take  Brooks  Station.  Number  of  tons  of  freight 
received  and  forwarded  (Table  IV),  654;  freight  to  and  from  Brooks 
Station  was  carried  14,335  utiles  (Table  XXVII) ;  therefore  the  average 
haul  ^^•?|-^=2i.8  miles;  station  expenses  per  ton  at  Brooks  Station 
(Table  IV),  71  cents;  cost  per  ton-mile  JJ;g-=3.26  cents.  To  this 
has  to  be  added  the  expenses  at  the  station  from  or  to  which  the 
freight  was  forwarded. 

If  both  stations  are  known,  the  cost  per  ton-mile  for  station  ex- 
penses can  be  readily  ascertained  from  Table  IV.  For  example,  for 
freight  shipped  between  Louisville  and  Brooks  Station,  distance  9.2 
miles : 

Station  expenses  at  Brooks  Station  per  ton  71.0  cents. 

Station  expenses  at  Louisville  per  ton 24.3      " 

Total  cost  per  ton 95.3      " 

Length  of  haul,  9.2  miles;  cost  per  ton-mile,  10.4  cents. 

This  example  sufficiently  illustrates  the  great  variety  in  cost,  and 
the  impossibility  of  making  the  ton-mile  the  measure  of  cost  of  or 
compensation  for  this  service.  The  ton  handled  would  be  a  more 
correct  measure,  although  there  is  necessarily  much  variety  even  in 
this  cost,  as  we  have  seen,  and  as  will  still  further  appear  from  an 
examination  of  Table  IV. 

It  must  therefore  be  evident  that  it  is  impossible  to  predetermine 
the  cost  per  ton-mile  of  freight  for  handling  without  taking  into 
consideration  the  length  of  the  haul  and  the  conditions  under  which 
the  station  service  has  to  be  performed. 

Maintenance  of  roadway  and  general  expense  (items  1-29). — The 
two  elements  that  determine  the  cost  per  ton-mile  for  this  service  are — 


24 


RAILROAD  TRANSPORTATION. 


time. 


time. 


The  cost  of  maintaining  one  mile  of  road,  etc.,  during  a  given 
The  number  of  tons  of  freight  passed  over  it  during  the  same 


The  former  differs  on  each  road,  and  so  does  the  latter:  hence 
uniformity  in  cost  per  ton-mile  is  impossible. 

The  following  table  shows  the  cost  of  maintenance  of  roadway 
and  general  expense  per  mile  of  road  on  the  seven  roads  operated  by 
the  Louisville  &  Nashville  Railroad  Company  during  the  last  year, 
and  the  average  number  of  tons  of  freight  passed  over  one  mile  of 
each  road ;  also  the  cost  per  ton-mile : 


M.  s. 


M.  L. 


Cost  of  maintenance  of  road  per  mile  1     *    „,    „_; 

per  year  (Table  III,  item  29)  ......  (    ^'-'^^T-s?! 

Tons  of  freight  passed  over  one  mile  1   ;    ^__z:/r„j 

of  road f  I    4^3,t>f2 

Cost  per  ton-mile cents  0.26 


N.&D.I  K.B. 

u 


B.B. 


$1,142.25  $1,243.49}  906.76'  436.69 

152,273]  143.378'  72^4561  11,538 
0.361    0.44]   0.7s  j   1.74 


R.B. 


G.B. 


436.61 

16,656 
1.66 


262.73 

6,137 
1.78 


Part  of  the  cost  of  maintenance  of  roadway  and  buildings  is 
chargeable  to  the  passenger  traffic.  The  division  of  charges  between 
the  two  classes  of  traffic  has  been  made  in  proportion  to  train-miles. 
It  follows  from  this  that  the  cost  per  ton-mile  of  freight  is  in  a 
measure  affected  by  the  relative  use  made  of  a  road  by  the  passenger 
and  freight  traffic. 

From  this  statement  will  be  noticed  the  great  difference  in  cost 
of  maintaining  one  mile  of  road,  buildings,  etc.  On  the  Main  Stem 
this  cost  is  $1,857.87,  on  the  Glasgow  Branch  $262.73  per  mile. 

An  examination  of  the  items  from  i  to  28,  Table  III,  will  show  in 
what  particulars  these  differences  occur.  A  few  may  be  mentioned 
here.  The  cost  per  mile  on  the  Main  Stem  and  Glasgow  Branch  is 
as  follows: 


M.  s. 


G.B. 


Renewal  of  ties 3^8.89 

Bridge  superstructure ,  250.26 

Ditching 69.23 

General  expense 346.14 

Salaries,  insurance,  and  taxes  100.40 


32.96 

25.14 
26.06 


Total I  $1,134.92 


$84.16 


The  difference  in  cost  in  these  five  items  on  the  Main  Stem  and 
Glasgow  Branch  is  $1,050.76  per  mile  of  road.     Part  of  this  great 


RAILROAD  TRANSPORTATION.  25 

difference  is  caused  from  the  fact  that  on  one  road  greater  expenditures 
were  made  during  this  year  than  was  due  to  the  year's  business;  on 
the  other  road  less.  It  will  be  remembered  that  the  yearly  depreci- 
ation of  cross-ties  on  the  Main  Stem  was  found  to  be  for  i6j^  years 
at  the  rate  of  $257.11  per  mile,  while  during  the  past  year  there  was 
expended  $368.89  on  the  Main  Stem,  and  on  the  Glasgow  Branch 
only  $32.96  per  mile;  the  first  sum  more,  the  latter  considerably  less 
than  is  required  to  make  good  a  year's  depreciation. 

There  are  great  differences  in  other  expenses,  such  as  repairs  of 
bridges,  on  the  two  roads.  On  the  Main  Stem,  as  has  been  men- 
tioned before,  the  cost  of  bridge  repairs  during  the  last  year  was 
unusually  heavy,  while  on  the  Glasgow  Branch,  with  only  one  small 
bridge,  the  cost  is  very  small.  The  general  expenses  of  administration 
on  the  Main  Stem  are  not  incurred  on  the  Glasgow  Branch,  which  is 
also  exempt  from  taxation.  Hence  the  great  difference  in  cost  of  main- 
tenance of  road  and  buildings  and  general  superintendence  between 
the  two  roads. 

When  we  examine  into  the  differences  existing  in  regard  to  the 
amount  of  business  transacted  in  one  year  over  one  mile  of  road — the 
other  element  named  which  enters  into  the  cost  of  one  ton  per  mile — 
we  find  the  variation  still  greater.  On  the  Main  Stem  433,662  tons, 
on  the  Glasgow  Branch  only  6,137  tons,  pass  over  one  mile  of  road 
per  year.  We  can  therefore  not  be  surprised  that  the  cost  on  the  Main 
Stem  for  maintenance  of  road  is  only  one  fourth  of  a  cent  per  ton-mile 
and  on  the  Glasgow  Branch  1.8  cents. 

hiterest  account. — The  original  cost  of  the  road  and  the  rate  of 
interest  form  one  element  and  the  amount  of  business  transacted  the 
other  which  determines  the  cost  per  ton-mile. 

The  cost  of  roads  per  mile  and  the  business  transacted  over  the 
same  vary  so  much  that  the  cost  per  ton-mile  for  interest  can  not  be 
expected  to  be  the  same  in  any  two  cases. 

It  is  impossible  to  predetermine  what  is  a  proper  charge  for  interest 
on  any  particular  road  until  these  elements — viz.,  the  cost  of  road  and 
the  amount  of  business — are  known. 

On  the  Main  Stem  of  the  Louisville  &  Nashville  Railroad,  dividing 
the  number  of  ton-miles  of  freight  carried  into  the  interest  chargeable 
to  the  freight  business,  the  cost  per  ton-mile  is  0.46,  while  on  the  Rich- 
mond Branch  it  is  10.86  cents,  over  twenty  times  as  much.     On  the 

D 


26  RAILROAD  TRANSPORTATION. 


five  Other  roads  the  interest  charge  varies  from  0.65  to  5.7  cents  per 
ton-mile.     (For  further  particulars  refer  to  Table  B,  page  20.) 

We  have  now  considered  the  variation  in  each  class  of  expendi- 
tures and  the  causes  therefor  per  ton-mile.  When  we  find  so  much 
variation  in  the  elements  which  make  up  the  cost  of  transportation 
we  can  not  expect  to  find  uniformity  in  the  total  cost. 

From  Table  B  it  appears  that  the  variation  in  the  total  cost  per 
ton-mile  is  from  1.78  cents  on  the  Main  Stem  to  19.09  cents  on  the 
Glasgow  Branch.  The  work  performed — viz.,  the  movement  of  one 
ton  of  freight  one  mile — is  the  same  on  all  roads,  yet  the  cost  of  per- 
forming is  ten  times  more  on  one  road  than  on  the  other. 

Great  as  this  variation  is  on  the  seven  roads  under  the  same  man- 
agement, the  variation  of  the  cost  per  ton-mile  is  still  greater  even 
on  the  same  road,  depending  as  it  does  upon  the  different  conditions 
under  which  the  service  has  to  be  performed.  It  would  lead  here  too 
far  to  thoroughly  analyze  the  cost  of  railroad  transportation  in  all  its 
details,  and  I  will  only  state  that  a  careful  investigation  shows  that 
under  the  ordinary  conditions  under  which  transportation  service  is 
generally  performed  the  cost  per  ton-mile  in  some  instances  may  not 
e'xceed  one  seventh  of  a  cent  and  in  others  will  be  as  high  as  73  cents 
per  ton-mile  on  the  same  road.  The  lower  cost  applies  to  freight 
carried  in  cars  that  otherwise  would  return  empty;  the  higher  cost 
to  freight  in  small  quantities  carried  short  distances. 

It  is  impossible  to  predetermine  the  cost  of  carrying  freight  on 
any  one  road  unless  the  conditions  under  which  it  is  to  be  carried, 
as  far  as  they  affect  the  cost  of  transportation,  be  previously  known. 

In  order  to  estimate  the  cost  of  transportation  under  the  various 
conditions  that  occur  it  is  necessary  to  classify  the  expenditures,  and 
to  separate  those  that  increase  with  the  amount  of  work  done  from 
those  that  are  fixed  and  independent  of  it;  and  to  ascertain  the  ratio 
of  increase  of  cost  with  the  increase  of  work.  Without  such  an  analysis 
of  the  cost  it  is  impossible  to  solve  the  question  of  cost  of  transpor- 
tation that  arises  in  the  daily  practice  of  railroad  operation.  A  mere 
knowledge  of  the  average  cost  per  ton-mile  of  all  the  expenditures 
during  a  whole  year's  operation  is  of  no  value  whatever  in  deter- 
mining the  cost  of  transporting  any  particular  class  of  freight,  as  no 
freight  is  ever  transported  under  the  average  condition  under  which 
the  whole  year's  business  is  transacted.     We  can  therefore  not  make 


RAILROAD  TRANSPORTATION.  27 

the  average  cost  per  ton-mile  the  basis  for  a  tariff,  if  it  is  to  be  based 
upon  cost;  but  we  must  classify  the  freight  according  to  the  condi- 
tions affecting  cost,  and  ascertain  the  cost  of  each  class  separately. 

A  formula  is  given  on  page  48,  showing  the  various  elements  enter- 
ing into  the  calculation  of  the  cost  of  railroad  transportation. 

COMPARISON   BETWEEN    RAILROAD    AND    OTHER   TRANSPORTATION. 

The  problem  of  ascertaining  the  cost  of  railroad  transportation  is"* 
not  quite  so  simple  as  it  may  at  first  sight  appear.  It  is  much  easier 
to  determine  the  cost  of  wagon,  canal,  or  steamboat  transportation. 
The  common  carrier  by  wagon  or  canal  knows  the  exact  amount 
of  toll  he  has  to  pay,  and  assumes  no  risk  of  an  investment  in  an 
expensive  roadway.  Nature  furnishes  a  roadway  to  the  carrier  by 
steamboat,  and  keeps  it  in  repair  free  of  charge.  Hence  in  esti- 
mating the  cost  of  transportation  by  wagon,  canal,  or  steamboat  two 
of  the  most  uncertain  and  changeable  elements,  and  at  the  same 
time  the  costliest,  of  railroad  transportation  are  eliminated  from  the 
calculation.  Railway  companies  are  not  only  common  carriers ;  they 
are  also  proprietors  of  a  roadway.  Their  tariff  charges  are  not  only 
for  transportation  service  proper,  for  the  service  rendered  as  common 
carriers,  but  also  for  the  use  of  the  roadway,  for  its  maintenance,  and. 
for  the  risk  assumed  in  the  investment. 

Notwithstanding  this  distinctive  character  of  railroad  service,  as 
compared  with  that  performed  by  other  common  carriers,  it  is  sought 
to  regulate  the  tariffs  of  railroads  and  to  judge,  compare,  and  criticise 
the  same  by  the  same  measure  or  rule  that  applies  properly  only  to 
the  service  of  common  carriers;  viz.,  the  measure  of  weight  of  freight 
and  distance  to  which  it  is  carried.  The  idea  prevails  that  the  cost  of 
transportation  of  a  ton  of  freight  on  one  railroad  should  not  materi- 
ally differ  from  that  on  others,  and  that  the  cost  of  moving  freight 
should  be  in  exact  proportion  to  the  distance  to  which  it  is  carried. 

These  rules  might  be  applied  with  some  degree  of  justice  to  the 
cost  of  moving  freight,  although  even  here  discrimination  between 
different  roads  and  different  lengths  of  haul  must  be  made;  but  the 
measure  of  weight  and  distance — the  ton-mile — can  not  be  used  as  a 
measure  of  cost  incurred  by  railroad  companies  as  proprietors  of  the 
roadway.  This  service  must  be  measured  by  different  rules.  The  cost 
of  the  roadway,  the  rate  of  interest  and  discount  in  obtaining  money. 


28  RAILROAD  TRANSPORTATION. 

the  cost  of  the  maintenance,  and  the  actual  use  made  of  the  roadway 
form  the  proper  data  for  calculation. 

On  the  seven  roads  operated  by  the  Louisville  &  Nashville  Railroad 
Company  the  cost  of  maintenance  of  road  and  interest  on  investment, 
when  distributed  over  the  number  of  ton-miles  carried  over  the  roads, 
is  as  follows  (see  Table  B,  page  20)  : 


Cost  per  ton-inile  cents 


M.S.   M.  L.  IN.  &  D.  K.  B.   B.  B.   R.  B. 


0.720611,0181  1.2462  3,0560  5.7334  7.3495 


G.  B. 


12.6492 


This  statement  shows  the  great  difference  in  cost,  from  0.7  cents  to 
12.6  cents  per  ton-mile,  although  the  service  rendered  is  exactly  the 
same :  the  use  of  the  roadway  for  one  mile  for  the  purpose  of  moving 
over  it  one  ton  of  freight. 

Were  these  roads  owned  by  one  party  and  used  by  another  (the 
latter  common  carriers  merely),  the  toll,  or  the  charge  for  the  use  of 
the  roadway,  would  have  to  be  made  according  to  these  figures,  in 
order  to  reimburse  the  proprietor  for  the  cost  of  the  service.  If  the 
.common  carrier  would  then  charge  separately  for  his  services  for  moving 
the  freight  by  the  ton-mile,  and  for  handling,  warehousing,  and  taking 
care  of  it  by  the  ton,  the  difference  between  the  charges  for  the  service 
as  common  carriers  on  the  different  roads  would  not  be  so  great. 

If  the  charges  for  railroad  transportation  were  thus  subdivided,  the 
reasonableness  of  the  same  could  be  more  readily  explained  and  un- 
derstood. The  confusion  which  exists  in  the  minds  of  some  people 
on  the  subject  of  railroad  tariffs  arises  from  the  prevailing  practice 
of  combining  the  charges  for  three  distinct  services  in  one,  and 
applying  a  measure  to  the  whole  which  only  can  properly  be.  applied 
to  a  portion  of  it. 

So  strong  has  become  the  conviction  in  the  public  mind  that  there 
should  be  uniformity  in  the  cost  of  railway  transportation  that  it  has 
found  expression  in  some  of  the  states  in  legislative  acts  enforcing 
uniformity  in  compensation,  while  the  natural  laws  governing  cost, 
causing,  as  we  have  seen,  so  great  a  difference,  are  allowed  to  operate 
undisturbed. 

The  ton-mile,  without  further  inquiry  as  to  its  adaptability,  is  made 
the  measure  of  cost.  If  by  comparing  the  tariffs  of  different  roads,  or 
the  tariff  for  different  services  on  the  same  road,  a  difference  be  dis- 


RAILROAD  TRANSPORTATION.  29 

covered,  the  road  charging  the  higher  rates  stands  convicted  of  prac- 
ticing extortion  and  unjust  discrimination. 

Upon  such  evidence  as  this  laws  have  been  enacted  in  some  states 
for  the  purpose  of  preventing  extortion,  and  which  affect  injuriously 
railroad  property  and  the  rights  of  a  great  many  innocent  people. 

GOVERNMENTAL   REGULATION    OF   RAILROAD   TARIFFS. 

It  can  not  be  denied  that  a  law  forcing  railroad  companies  to 
furnish  the  use  of  their  roads  and  to  transact  the  business  of  a  com- 
mon carrier  for  less  than  cost  is  simply  a  law  of  confiscation,  no 
matter  under  what  pretext  of  authority  it  is  enacted.  It  can  hardly 
be  maintained,  in  the  light  of  our  knowledge  of  human  nature,  that 
at  the  time  the  contracts  between  some  of  the  states  and  the  builders 
of  the  roads  were  made  the  latter  were  given  to  understand,  as  dis- 
tinctly and  clearly  as  they  are  now  made  to  understand,  that  the  state 
reserved  the  right  to  confiscate  their  property  at  pleasure.  It  appears 
that  the  interpretation  of  the  law  by  one  party  to  the  contract  was  a 
great  surprise  to  the  other,  originating  as  it  did  many  years  after  the 
contract  was  made,  during  which  time  the  construction  now  put  upon 
it  was  not  thought  of  or  sought  to  be  enforced.  In  ordinary  cases 
the  true  meaning  of  a  contract,  if  not  unequivocally  expressed,  is 
determined  from  the  manner  in  which  the  same  has  been  executed 
through  a  long  period  of  time ;  but  this  does  not  seem  to  hold  good 
when  railroads  are  parties  to  the  contract. 

The  question  as  to  the  right  and  the  extent  of  the  right  of  the 
government  of  a  state  or  the  national  government  to  prescribe  fixed 
compensation  for  specific  transportation  services,  or  to  regulate  in  a 
more  general  manner  the  railroad  tariffs,  is  one  of  great  interest  and 
importance  to  all  owners  of  railroad  property. 

The  relations  of  the  Louisville  &  Nashville  Railroad  Company 
to  the  states  in  which  it  is  located  are  well  defined  by  the  several 
charters ;  yet  the  national  government,  at  least  one  branch  of  it,  has 
lately  claimed  jurisdiction  over  railroad  tariffs,  on  the  plea  of  having 
the  power  under  the  constitution  to  regulate  commerce  between  the 
states;  and  there  prevails  a  general  tendency  in  the  public  mind  that 
something  must  be  done  in  the  way  of  railroad  legislation. 

In  the  last  legislature  of  the  state  of  Kentucky  a  law  was  passed 
through  the  Senate  making  it  obligatory  on  all  the  roads  in  the  state 


30  RAILROAD  TRANSPORTATION. 


to  carry  way  freight  (including  the  cost  of  handling  it)  at  a  rate  not 
exceeding  25  per  cent  over  the  lowest  rate  per  mile  charged  at  the 
same  time  for  through  freight.  A  full  explanation  of  the  chartered 
rights  of  the  company,  and  of  the  bearing  and  effect  of  such  a  law 
upon  the  railroads  of  the  state  and  upon  public  interests,  was  made  to 
the  intelligent  committees  of  both  legislative  branches,  and  this  was 
sufficient  to  prevent  the  final  enactment  of  that  law. 

In  the  legislature  of  the  state  of  Tennessee  several  laws  on  the 
subject  of  railroad  tariffs  passed  through  one  and  some  through  the 
other  branch  of  the  legislature,  and  only  failed  at  the  close  of  the 
session  for  want  of  time. 

These  laws  were  of  such  a  character  that  had  they  passed,  and 
could  they  have  been  enforced,  would  have  ruined  the  whole  railroad 
property  of  that  state. 

It  is  true  that  such  legislation  could  be  clearly  proven  illegal  and 
void,  both  under  our  charters  and  under  the  constitutions  of  the  states, 
yet  during  the  time  required  to  do  so  great  losses  might  be  inflicted 
upon  the  stockholders,  and  expensive  and  troublesome  litigation  would 
follow.  All  of  which  can  be  avoided  by  a  more  thorough  knowledge 
of  the  subject  on  the  part  of  the  people  and  their  representatives.  It 
can  be  readily  shown  that  many  of  the  difficulties  of  what  is  called 
the  railroad  problem  are  only  apparent.  They  have  their  existence 
in  the  ignorance  of  the  people  upon  this  subject,  and  as  soon  as 
the  facts  appear  in  their  full  and  true  light  most  of  them  will  vanish 
without  the  aid  of  legislative  interference. 

It  is  with  a  view  of  bringing  about  a  clearer  and  better  under- 
standing of  railroad  transportation  that  I  have  referred  to  it  in  this 
report  at  so  great  length. 

Nine  tenths  of  the  stockholders  of  the  Louisville  &  Nashville 
Railroad  and  its  leased  lines  are  citizens  of  the  states  in  which  their 
roads  are  located ;  the  question  of  legislative  control  of  railroads  in 
this  instance  is  not  a  mere  party  question  between  the  people  and 
"soulless  corporations,"  but  it  is  a  question  between  the  people  who 
furnish  the  transportation  and  the  people  who  use  the  roads.  To  a 
great  extent  they  are  the  same,  a  great  portion  of  the  road  being 
owned  by  cities  and  counties.  A  careful  study  therefore  by  the 
people  of  the  facts  and  questions  involved  becomes  almost  a  matter 
of  necessity  in  the  preservation  of  their  own  property. 


RAILROAD  TRANSPORTATION. 


31 


The  subject  of  legislative  enactments  regarding  the  tariffs  of  rail- 
roads not  owned  by  the  government  must  be  considered  in  two 
aspects — first,  as  to  the  abstract  right  of  the  government  to  establish 
tariffs;  and  second,  as  to  the  practicability  of  establishing  and  en- 
forcing the  same  so  as  to  accomplish  the  object  for  which  the  control 
is  undertaken. 

The  first  question  is  one  of  law,  and  must  be  decided  by  the  courts 
in  accordance  with  contracts,  charters,  and  constitutions;  but  the 
second  is  a  question  for  the  consideration  of  experts  in  the  manage- 
ment of  railroads,  and  must  be  decided  from  a  knowledge  of  the  facts 
and  the  natural  laws  controlling  the  subject. 

Should  the  courts  decide  that  the  government  has  the  right  to 
establish  or  control  railroad  tariffs,  and  it  be  found  in  the  nature  of 
the  case  that  the  exercise  of  that  right  necessitated  the  violation  of 
other  fundamental  laws,  the  question  as  to  the  abstract  right  would 
become  of  secondary  importance. 

There  is  a  decision  on  record  that  bears  upon  this  subject.  It  is 
not  reported  in  the  law-books,  but  has  been  universally  approved.  A 
certain  citizen  of  Venice  was  given  the  right  under  the  law  to  take 
one  pound  of  flesh  from  a  fellow-citizen.  He  found  it  impossible  to 
obtain  It  without  also  taking  blood,  and  probably  life,  to  which  he  had 
no  lawful  claim;  and  the  judgment  therefore  remained  unexecuted. 

The  right  of  the  government  to  establish  and  enforce  railroad 
tariffs  does  not  carry  with  it  the  right  to  confiscate  the  property  of 
railroad  c  ompanies.  If  a  tariff  can  not  be  established  and  enforced 
unless  the  property  of  railroad  companies  is  used  without  due  com- 
pensation and  without  their  consent,  then  this  right  ought  not  to  be 
exercised,  unless  it  be  contended,  as  it  has  been  by  some,  that  "might 
is  right."  But  even  then  it  would  soon  be  discovered  that  to  deal 
unjustly  with  railroad  companies  will  react  sooner  or  later  injuriously 
upon  the  public  interest,  and  that  to  act  in  accordance  with  the  dic- 
tates of  justice  in  this  as  in  all  other  cases  will  prove  the  best  policy. 

The  question  as  to  the  right  and  policy  of  governmental  interfer- 
ence with  railroad  tariffs  practically  resolves  itself  into  this  question : 
whether  it  be  possible  for  the  legislature  to  undertake  this  control 
without  the  violation  of  other  laws  and  the  rights  of  parties  interested, 
and  in  such  a  manner  as  to  fully  accomplish  the  object  for  which  this 
control  is  undertaken.     This  question  I  will  now  consider. 


32 


RAILROAD  TRANSPORTATION, 


PRINCIPLES   UPON   WHICH   RAILROAt>    TARIFFS   MUST    BE   CONSTRUCTED. 

The  first  principle  that  should  guide  the  formation  of  railway 
tariffs  stands  written  in  the  good  book — "  the  laborer  is  worthy  of  his 
hire."  Those  furnishing  transportation  for  others  should  be  reim- 
bursed for  at  least  the  cost.  Had  this  principle  not  been  recognized 
at  the  time  the  roads  were  built,  few  would  now  be  in  existence,  and 
if  it  is  to  be  repudiated  now,  few  will  be  constructed  hereafter.  The 
proper  basis  of  railroad  tariffs  is  therefore  the  cost  of  the  transporta- 
tion service. 

I  have  shown  in  this  report  the  great  variation  in  the  cost  of  rail- 
way transportation  on  different  roads,  and  the  causes  which  necessarily 
bring  about  this  result.  From  it  necessarily  follows  the  impossiblity 
of  enacting  general  laws  establishing  tariffs  applicable  to  more  than 
one  road. 

What  is  reasonable  compensation  for  railway  transportation  service, 
or  what  constitutes  just  or  unjust  discrimination  in  railway  charges,  is 
not  a  question  that  can  be  decided  a  priori,  or  that  can  be  formu- 
lated into  a  general  law.  It  can  only  be  decided  in  each  individual 
case,  when  all  the  conditions  under  which  the  service  is  per- 
formed and  the  elements  controlling'  its  cost  are  known;  in  most 
cases  it  can  only  be  decided  correctly  after  the  service  has  been 
performed. 

It  would  be  just  as  sensible  to  predetermine  by  legislation  what 
shall  be  the  cost  of  raising  a  bushel  of  corn  as  to  predetermine  the 
cost  of  carrying  a  ton  of  freight.  The  action  of  the  sun  and  rain 
upon  the  growth  of  the  corn  and  the  quantity  of  the  yield  are  no  less 
uncertain  elements  than  some  of  the  elements  which  enter  into  the  cost 
of  transportation,  service. 

The  average  cost  of  moving  one  ton  one  mile  on  the  Main  Stem 
of  the  Louisville  &  Nashville  Railroad  is  1.78  cents;  on  the  Glasgow 
Branch  19.09  cents.  What  justice  would  there  be  in  establishing  a 
law  requiring  both  roads  to  work  for  the  same  compensation  ?  Nor 
would  it  be  more  just  to  classify  the  railroads  and  enact  a  special 
tariff  for  each  class,  as  no  general  laws  exist  or  have  as  yet  been  dis- 
covered under  which  such  classification  could  be  made;  the  various 
combinations  of  elements  of  cost  are  different  on  and  peculiar  to 
each  road,  controlled  as  they  are  by  local  causes. 


RAILROAD  TRANSPORTATION.  33 

The  great  difference  in  cost  referred  to  in  this  report  occurs  in  the 
average  cost  per  ton-mile  of  transportation  during  the  period  of  a 
whole  year;  but  there  is  still  greater  difference  in  the  cost  of  trans- 
portation of  one  ton  one  mile  on  the  same  road,  varying  with  the 
conditions  under  which  the  service  is  performed,  according  to  the 
length  of  haul,  the  quantities  in  which  freight  is  transported,  and 
whether  the  freight  is  carried  in  cars  that  would  have  to  return  empty 
or  in  special  trains.  I  have  mentioned  that  according  to  these  and 
other  conditions  it  may  cost  one  seventh  of  a  cent  only  in  some 
cases  and  seventy-three  cents  in  others  to  transport  one  ton  of  freight 
one  mile. 

The  labor  therefore  of  forming  a  tariff  based  strictly  upon  cost  is 
very  intricate,  and  not  of  such  a  character  that  it  can  be  properly  per- 
formed by  legislative  bodies  as  at  present  constituted.  The  only  mode 
in  which  they  could  act  would  be  to  appoint  competent  officers,  whose 
duty  it  would  be  to  ascertain  the  cost  of  transportation  on  each  indi- 
vidual road,  and  to  establish  a  tariff  accordingly.  If  this  duty  could 
be  properly  performed,  few  railroad  companies  would  complain,  as  the 
majority  work  for  less  than  cost. 

A  tariff  so  established  strictly  upon  the  basis  of  cost  would,  how- 
ever, be  of  little  use  unless  it  be  accompanied  by  a  law  forcing  the 
people  to  ship  over  the  road  a  certain  quantity  of  freight  at  the  estab- 
lished rates.  If  they  are  left  free  to  select  other  modes  of  transporta- 
tion that  may  be  cheaper,  then  it  would  soon  become  apparent  that 
the  railroad  would  be  of  use  only  to  a  very  limited  number  of  people ; 
as  the  number  of  shippers  is  decreased,  the  cost  of  transportation 
would  be  increased  in  many  cases  to  such  an  extent  that  the -turnpike 
would  furnish  a  cheaper  mode  of  transportation.  The  fact  would 
soon  become  evident  that  railroad  tariffs  can  not  be  based  upoji  the  cost 
of  transportation  alone.  Other  elements  enter  into  their  formation 
that  can  not  be  ignored,  if  it  be  intended  to  develop  fully  the  useful- 
ness of  railroad  property  both  to  its  owners  and  to  the  public. 

The  question  that  greatly  controls  railroad  tariffs  is  what  is  the 
service  worth,  not  what  does  it  cost;  and  this  is  a  mere  commercial 
question,  uncontrollable  by  acts  of  legislation.  The  relative  value  of 
an  article  at  the  place  from  and  to  which  it  is  shipped  determines  the 
charges  for  transportation  it  can  bear.  If  a  greater  charge  is  made 
than  the  difference  in  these  values,  the  article  can  not  be  moved.     It 


34  RAILROAD  TRANSPORTATION. 

may  therefore  become  necessary  to  charge  on  some  articles  less  than 
the  full  cost  of  transportation  in  order  to  enable  it  to  be  moved  at  all; 
and  this  necessitates  again  to  charge  more  on  others  which  can  bear 
higher  charges. 

An  element  is  here  necessarily  introduced  of  a  purely  commercial 
character,  and  which  requires  a  knowledge  of  the  value  of  articles  in 
the  different  markets  of  the  country  between  which  they  are  to  be 
exchanged,  situated  often  far  beyond  the  limits  of  any  one  state. 
This  element  must  necessarily  work  constant  changes  in  tariffs,  and 
it  would  therefore  be  impossible  to  predetermine  the  same  or  fix  them 
by  legislative  action. 

There  is  another  disturbing  element  that  prevents  fixed  railroad 
tariffs.  //  is  competition.  The  simple  question  requires  to  be  an- 
swered. Will  you  carry  freight  and  passengers  for  the  same  that  other 
transportation  lines  charge,  either  by  rail  or  river,  or  will  you  not  carry 
them  at  all  ? 

All  that  has  to  be  known  by  the  railroad  manager  to  answer  this 
question  is  the  minimum  cost  at  which  the  service  can  be  performed. 
K  the  obtainable  rate  exceeds  cost,  no  matter  how  little,  it  becomes 
his  interest  to  accept  the  terms  offered.  The  important  question  to 
be  decided  is  what  is  the  minimum  cost? 

In  the  statements  I  have  given  on  page  20  the  average  cost  of 
transportation  per  ton-mile  for  four  different  classes  of  expenses  were 
given.  Two  of  these  classes  are  not  affected  by  the  work  done,  but 
are  fixed;  viz.,  the  cost  of  maintenance  of  road  and  the  interest  on 
the  investment.  On  the  Main  Stem  of  the  Louisville  &  Nashville 
Railroad  they  amounted  to  0.72  cents  per  ton-mile,  or  40  per  cent  of 
the  whole  cost,  and  the  expenses  for  moving  and  handling  freight  were 
1.06  cents  per  ton-mile. 

Now  it  follows  that  when  freight  is  to  be  carried  at  a  rate  fixed 
by  competition,  and  can  not  be  carried  at  all  if  a  greater  rate  is 
demanded,  the  Louisville  &  Nashville  Railroad  Company  can  carry 
the  same  at  the  rate  of  1.06  cents  per  ton-mile,  and  not  lose  thereby; 
if  it  could  obtain  more,  the  additional  receipts  would  be  just  so  much 
profit,  applicable  to  lowering  the  rate  on  other  freight.  Yet  if  the 
Louisville  &  Nashville  Railroad  Company  was  to  be  forced  by  law  to 
do  all  their  business  at  this  low  rate,  the  expenses  would  exceed  the 
income  by  40  per  cent,  and  the  road  could  not  be  operated  at  all. 


RAILROAD  TRANSPORTATION.  35 

Tlic  company  would  prefer  to  abandon  the  competitive  business  and 
arrange  the  tariff  for  way  business,  by  charging,  when  this  is  possible, 
as  much  more  as  the  profit  on  the  competitive  business  would  have 
amounted  to. 

From  this  it  will  be  seen  that  the  transaction  of  this  competitive 
business,  apart  from  the  indirect  benefits  which  it  may  exercise,  is 
more  to  the  advantage  of  the  shipper  whose  location  does  not  give 
him  competitive  privileges  than  to  the  railroad  company. 

Notwithstanding  this  fact,  the  carrying  of  competitive  freight  at 
low  rates>  k  the  most  fruitful  source  of  complaint  on  the  part  of  the 
shipper  who  pays  higher  rates.  It  has  given  rise  to  the  charges  so 
commonly  preferred  against  railroad  companies  of  making  unjust 
discriminations  in  their  tariffs,  and  against  which  legislative  protec- 
tion has  mainly  been  invoked. 

JUST   AND    UNJUST   DISCRIMINATION. 

It  is  maintained  that  to  carry  freight  between  distant  competitive 
points  at  lower  rates  than  between  intermediate  points  where  no  com- 
petition exists  is  an  act  of  injustice  to  the  shippers  at  the  latter  points. 
This  conclusion  is  based  upon  the  assumed  principle  that  common 
carriers  are  bound  to  serve  their  customers  alike.  The  application, 
however,  of  a  general  principle  to  complicated  transactions,  such  as 
take  place  in  the  business  of  common  carriers,  without  taking  into 
account  a//  the  facts  bearing  upon  the  same,  is  apt  to  lead  to  erro- 
neous conclusions,  as  it  does  in  this  case. 

I  will  illustrate  this  subject  by  a  special  case  which  is  a  represen- 
tation of  many.  Louisville  and  Memphis  are  connected  by  navigable 
rivers,  and  in  the  exchange  of  commodities  between  the  two  cities 
they  have  always  had  the  benefit  of  low  rates  of  river  transportation. 
A  railroad  377  miles  long  is  built  connecting  the  two  cities,  passing 
through  a  number  of  interior  places,  which  had  before  only  imperfect 
communications.  Suppose  one  of  these  places,  called  A,  be  located  on 
the  line  of  this  road,  100  miles  from  Memphis  and  277  from  Louisville ; 
how  is  it  affected  by  the  construction  of  the  road?  Before  the  road 
was  built  freight  from  Louisville  destined  to  A  was  shipped  to  Memphis 
by  river  and  then  by  wagon  to  A.  Since  the  road  has  been  built  there 
are  two  routes  from  Louisville  to  A,  one  by  river  to  Memphis  and, 
thence  by  rail,  and  the  other  by  rail  direct  to  A.     Taking  the  first 


36  RAILROAD  TRANSPORTATION. 

route,  the  charge  for  shipping  to  A  is  made  by  adding  to  the  river  rate 
from  Louisville  to  Memphis  the  rail  rate  for  100  miles  from  Memphis 
to  A.  This  latter  rate  is  much  below  the  rate  formerly  charged  by 
wagon,  and  to  the  extent  of  this  difference  the  shipper  at  A  has  been 
benefited  by  the  construction  of  the  road,  not  to  mention  the  greater 
convenience  and  saving  in  time  of  which  he  now  gets  the  benefit. 
This  ought  and  would  be  satisfactory  if  the  road  stopped  at  A ;  but 
the  fact  that  a  new  route  is  opened  to  him,  direct  from  Louisville, 
only  277  miles,  causes  all  the  trouble. 

The  railroad  is  obliged  to  carry  freight  from  Louisville  to  Memphis 
at  the  low  river  rate,  which  is  much  below  the  average  cost  of  railroad 
transportation;  but  it  derives  from  this  rate  a  small  profit,  for  reasons 
fully  explained  on  page  34.  It  is  obliged  for  the  same  reasons  to 
charge  its  customer  at  A  more  per  ton-mile  for  the  distance  of  277 
miles  than  is  charged  to  Memphis;  but  this  can  in  no  case  exceed 
the  sum  of  the  river  and  rail  rates  from  Louisville  to  A  via  Memphis, 
for  if  it  did,  the  latter  route  would  be  the  preferred  one. 

Now  the  fact  that  the  railroad  carries  freight  from  Louisville  to 
Memphis  through  A  at  a  lower  rate  than  it  carries  it  from  Louisville 
to  A  is  considered  an  act  of  injustice  to  the  shipper  at  A,  and  he 
demands  that  he  be  put  on  the  same,  or  even  a  better,  footing  with 
the  shipper  at  Memphis,  who  always  had  the  advantage  of  lower  rates 
of  transportation  before  the  road  was  built.  His  demand  amounts  to 
this,  that  the  railroad  company  having  expended  millions  of  dollars 
in  the  construction  of  a  railroad  connecting  the  interior  places,  which 
were  without  the  improved  modes  of  transportation,  with  two  cities 
upon  navigable  rivers,  conferring  thus  a  great  benefit  upon  those 
interior  places,  shall,  in  consideration  of  having  done  so  much,  do 
still  more,  and  secure  for  them  the  same  advantages  possessed  by  the 
places  situated  upon  the  banks  of  navigable  rivers. 

It  is  rather  surprising  that  some  courts  have  decided  this  position 
to  be  right.  They  have  declared  it  unjust  discrimination  for  railroad 
companies  to  charge  higher  rates  of  transportation  to  intermediate 
than  more  distant  points,  a  decision  based  upon  the  improper  appli- 
cation of  the  principle  that  common  carriers  must  not  make  any 
distinction  among  shippers. 

From  the  foregoing  illustration  it  will  appear  that  discriminations 
necessarily  have  to  be  made ;    but  it  will  also  appear  that  it  is  not 


RAILROAD  TRANSPORTATION.  37 

the  common  carrier  who  creates  the  same  arbitrarily,  but  the  nature 
of  things  makes  them  necessary.  To  pursue  anotlier  course  than  that 
indicated  would  result  to  the  disadvantage  of  all  concerned  and  benefit 
no  one.  Were  the  low  competitive  freight  to  be  refused,  the  cost  of 
carrying  other  freight  would  be  increased.  If  the  same  rate  was  to  be 
charged  to  all  interior  points  as  to  the  competitive  points,  the  railroad 
could  not  be  operated  at  all. 

Different  localities  are  more  or  less  favored  in  regard  to  transpor- 
tation facilities,  either  by  nature  or  the  enterprise  of  man.  It  can  not 
be  maintained  that  it  is  the  duty  of  the  common  carrier  to  equalize 
these  existing  inequalities  at  his  own  expense.  All  that  is  required 
of  him  is  not  to  create  them  himself  arbitrarily.  He  must  treat  all 
alike  that  are  situated  alike ;  but  he  can  not  be  bound  to  wipe  out 
existing  differences.  He  may  be  obliged  to  carry  freight  at  a  lower 
rate  to  some  localities  than  to  others,  but  this  in  itself  does  not  con- 
stitute an  injustice  or  injury  to  the  shipper  in  a  less  favored  locality, 
as  long  as  the  charges  made  are  reasonable  in  themselves  and  alike  to 
all  in  the  same  situation. 

Discriminations  are  the  necessary  result  of  competition,  and  com- 
petition is  the  best  protection  against  extortionate  charges — much  more 
efficient  than  any  artificial  legislative  device.  To  take  away  the  right 
from  railroad  proprietors  to  establish  their  tariffs  upon  the  recognized 
principles  that  guide  all  other  commercial  transactions,  and  substitute 
fixed  tariffs  or  arbitrary  rules  on  which  they  must  be  based,  would 
destroy  the  great  usefulness  of  railroads. 

It  may  be  and  has  been  asserted  that  the  effect  of  competition  is 
not  felt  upon  way  business  for  which  no  direct  competition  is  possible. 
This,  however,  is  an  erroneous  view.  When  there  is  competition  at 
any  one  point  upon  a  railroad  it  makes  itself  felt  over  some  portion 
of  the  road,  more  or  less,  according  to  the  situation  of  the  competing 
line.  The  truth  of  this  can  be  illustrated  by  again  referring  to  the 
case  already  cited.  The  rate  from  Louisville  to  an  intermediate 
station  on  the  road  from  Louisville  to  Memphis  is  established,  as  I 
have  shown,  by  adding  to  the  river  rate  to  Memphis  the  railroad  rate 
frorti  Memphis  to  this  intermediate  station,  which  I  have  called  A. 
The  rail  rate  is  limited  by  the  charter,  which  prescribes  maximum  rates, 
or  where  this  is  not  the  case  it  would  be  limited  by  the  consideration 
as  to  what  constitutes  a  reasonable  compensation  for  loo  miles  of  rail 


J 


8  RAILROAD  TRANSPORTATION. 


transportation,  and  could  in  no  case  exceed  the  rates  charged  for 
transportation  by  other  modes  that  might  be  available  from  Memphis 
to  A.  It  is  therefore  the  competitive  river  rate  from  Louisville  to 
Memphis  that  influences  and  establishes  the  rate  to  this  interior  point. 

As  the  number  of  competitive  points  is  multiplied  on  any  one  road 
the  rates  to  a  greater  number  of  interior  points  are  influenced,  and 
this  to  a  greater  extent.  Thus  the  Memphis  Line  from  Bowling 
Green,  where  it  diverges  from  the  Main  Stem  to  Memphis,  259 
miles  in  length,  is  crossed  by  two  navigable  rivers  and  four  other 
railroads,  establishing  thus  six  competing  points.  The  shippers  over 
this  line  can  therefore  always  avail  themselves  of  the  competitive  rates 
to  the  nearest  point.  They  can  in  no  case  be  charged  more  from  Louis- 
ville direct  to  any  station  of  the  road  than  the  competing  rate  and  the 
rate  of  the  short  rail  haul  added,  no  matter  what  may  be  the  distance 
from  Louisville  to  the  interior  point.  The  consequence  is  that  all  the 
interior  points  enjoy  the  benefit  of  whatever  competition  there  is;  but 
it  also  follows  that  the  tariff"  upon  such  a  line  can  not  be  constructed 
upon  a  mileage  basis,  but  must  make  more  or  less  discrimination  be- 
tween the  different  localities  according  as  they  are  affected  by  compe- 
tition. It  may  necessarily  require  freight  to  be  hauled  over  a  longer 
distance  for  much  less  than  it  is  carried  for  a  shorter  distance.  It  is 
either  this  or  the  abandonment  of  competitive  business. 

If  railroad  companies  could  agree  among  themselves  to  stop  compe- 
tition to  junction  points,  one  of  the  most  fruitful  causes  of  complaint 
against  discrimination  in  railroad  tariffs  would  at  once  be  remedied; 
but  it  would  be  at  the  expense  of  the  benefit  of  competition. 

The  same  result  must  follow  if  the  rates  to  competing  points  are 
determined  by  the  legislature  of  the  state  in  which  they  are  situated. 
But  in  this  case  competitors  by  river  and  railroads  in  other  states  should 
also  be  compelled  to  maintain  these  rates;  otherwise  the  roads  over 
which  the  state  has  complete  control  could  not  do  business  at  all  at 
competing  points.  Surely  the  people  could  not  be  benefited  by  such 
a  course;  it  would  be  much  better  to  let  the  natural  laws  of  compe- 
tition have  their  full  force.  To  interfere  with  them  is  certainly  not 
to  regulate  but  to  obstruct  commerce,  for  which  there  is  no  authority 
in  the  constitution  of  the  United  States. 

The  problem  of  establishing  a  railroad  tariff  that  possesses  all  the 
desirable  requirements  is  one  not  of  easy  solution.     It  is  an  intricate 


RAILROAD  TRANSPORTATION.  39 

and  difficult  problem ;  but  the  more  complicated  we  find  it  to  be,  the 
more  reasonable  it  is  to  assume  that  it  can  better  be  solved  by  those 
who  are  directly  interested,  who  practically  devote  their  whole  time 
and  attention  to  it,  than  by  members  of  a  legislature,  a  majority  of 
whom  may  be  presumed  to  be  utterly  ignorant  of  this  special  subject. 

It  is  generally  supposed  that  the  right  to  establish  their  own  tariffs 
gives  great  power,  liable  to  abuse,  into  the  hands  of  railroad  managers, 
but  upon  closer  investigation  it  will  be  found  that  the  extent  of  this^ 
power  is  generally  much  overrated.  Enlightened  self-interest  dictates 
its  exercise  reasonably,  and  in  a  spirit  of  liberality;  competition, 
especially  with  water  transportation,  circumscribes  it  into  the  narrowest 
limits,  if  it  does  not  nullify  it  altogether. 

On  the  roads  operated  by  the  Louisville  &  Nashville  Railroad 
Company  the  maximum  legal  rates  authorized  by  the  charter  vary 
from  7  to  10.2  cents  per  ton  per  mile.  The  average  actual  charge 
made  is  2.172  cents.  Why  does  not  the  company  charge  more, 
having  an  undoubted  right  to  do  so?  Other  causes  than  the  mere 
will  of  the  managers  limit  the  charges.  In  one  case  it  is  competition, 
in  another  the  freight  is  of  such  a  character  that  it  can  not  bear  higher 
charges,  or  both  of  these  causes  are  in  operation  at  the  same  time. 

I  can  assert  from  my  personal  experience  that  on  920  miles  of 
railroads,  stretching  in  all  directions  over  a  large  territory  of  country, 
the  managers  have  no  more  to  do  with  the  making  of  the  tariffs  than 
to  study  the  conditions  and  limitations  to  which  I  have  referred,  and 
to  conform  to  the  same.  The  result  is  that  the  tariff  charges  on  these 
road=  arc  b^it  from  20  to  30  per  cent  of  the  maximum  authorized  by 
law.  I  can  also  affirm  that  a  similar  state  of  affairs  exists  in  regard  to 
the  large  number  of  railroads  with  whose  affairs  I  am  acquainted. 

If  the  mere  will  of  the  managers,  w.ich'jckcu  by  other  consid- 
erations, had  absolute  control  over  railroad  tariffs,  would  it  be  likely 
that  so  many  roads  in  the  United  States  would  be  in  the  hands  of 
receivers;  so  many  more  unable  to  pay  dividends  to  stockholders; 
so  comparatively  few  paying  the  usual  interest  on  the  cost  of  con- 
struction; and  so  few  paying  a  larger  interest? 

Any  one  who  asserts  that  the  railroads  in  this  country  as  a  whole 
are  guilty  of  extortion  only  shows  his  own  ignorance  of  the  facts,  easily 
accessible,  and  exhibited  by  the  statistics  in  regard  to  the  financial 
result  of  railroad  operation  in  the  United  States.     The  truth  is  that 


40 


RAILROAD  TRANSPORTATION. 


the  people  of  this  country  are  furnished  with  transportation  for  less 
than  its  cost,  at  the  expense  of  the  owners  of  railroad  property. 

The  general  practice  of  citing  one  or  two  cases  of  unreasonable 
railroad  charges,  or  a  few  cases  where  railroad  companies  pay  divi- 
dends upon  watered  stock,  and  basing  upon  this  the  charge  that  all  or 
the  great  majority  of  railroads  in  the  country  are  doing  this,  is  mani- 
festly unjust.  If  the  charge  is  made  against  the  railroad  system  as 
a  whole,  it  stands  refuted  by  the  general  result  of  its  operations  as  a 
*  whole. 

That  errors  are  committed  by  railroad  managers  in  arranging  their 
tariffs,  especially  in  details,  can  not  be  denied  (and  this  is  equally  true 
in  other  important  human  avocations),  nor  can  it  be  wondered  at,  if  we 
bear  in  mind  the  complications  and  difficulties  of  this  work.  But  as 
the  interests  which  are  intended  to  be  served  necessarily  suffer  from 
these  errors,  it  should  be  presumed  that  they  are  the  result  of  ignorance 
rather  than  evil  intent,  and  the  only  correction  in  this  matter  is  better 
information,  sounder  judgment,  and  greater  intelligence.  If  these 
requirements  could  be  supplied  by  legislation,  the  end  would  be 
accomplished.  Much  might  be  done  by  instituting  intelligent  in- 
quiry and  investigation  of  the  facts  bearing  upon  the  subject,  and  by 
disseminating  the  result  among  the  people.  In  this  direction  legis- 
lative influence  should  first  be  exercised. 


GOVERNMENTAL   RAILROAD    TARIFFS   A   FAILURE. 

The  foregoing  consideration  of  the  subject  of  legislative  control 
of  railroad  property  leads  to  the  following  conclusion^. 

First,  that  such  control  can  not  be  exercised  by  general  laws  estab- 
lishing fixed  railroad  tariffs  without  a  violation  of  the  rights  of  the 
parties  ownir.^  Cw.^  p.op'^'rty. 

Seconi^,\^\'3X  it  is  impossible  under  such  fixed  railroad  tariffs  to  fully 
develop  the  usefulness  of  railroads  to  their  owners  and  the  people. 

The  experience  of  the  past  regarding  special  railroad  legislation 
confirms  the  correctness  of  these  conclusions. 

Mr.  Charles  F.  Adams  sums  up  the  result  of  his  thorough  investi- 
gations of  the  subject  of  governmental  interference  with  railroad 
tariffs  in  the  report  of  the  railroad  commissioners  to  the  legislature 
of  the  state  of  Massachusetts.  Referring  especially  to  Great  Britain, 
he  says,  "Nowhere  has  the  system  of  special  legislation  been  more 


RAILROAD  TRANSPORTATION. 


41 


persistently  followed,  and  nothing,  it  may  be  added,  could  have  been 
more  complete  than  its  failure." 

And  again:  "The  result  of  thirty  years  of  successive  and  wholly 
abortive  efforts  in  this  direction  in  England  has  been  that  Parliament 
has  at  last  settled  down  in  the  conviction  that  the  developments  and 
necessities  of  trade  in  practice  always  have  nullified,  and  inevitably 
must  nullify,  the  special  acts,  no  matter  how  carefully  and  skillfully 
they  may  be  prepared." 


PREVENTION   OF    EXTORTION   AND    UNJUST   DISCRIMINATION. 

It  is  only  surprising  that  it  should  have  required  thirty  years  to 
establish  a  fact  that  must  appear  evident  at  once  if  we  thoroughly 
analyze  the  nature  of  the  object  sought  to  be  attained,  and  the 
instruments  and  means  available  for  its  attainment,  and  still  more 
surprising  when  we  consider  that  the  object  of  all  the  efforts  re- 
ferred to  could  be  simply  reached  by  enforcing  the  commo?i  law, 
which  prohibits  common  carriers  from  making  unreasonable  charges 
for  transportation. 

Let  the  parties  guilty  of  a  violation  of  this  law  alone  be  held 
responsible.  This  course  has  been  deemed  sufficient  heretofore  to 
prevent  wrong-doing,  and  if  followed  and  adhered  to,  should  also  be 
sufficient  to  prevent  extortion  on  the  part  of  railroad  companies. 

It  has  been  urged  against  the  efficiency  of  the  law  that  the  expense 
of  litigation  deters  individuals  from  seeking  redress.  To  remove  this 
objection  the  state  could  provide  an  indictment  against  offending  rail- 
road companies,  and  throw  the  cost  of  litigation  upon  the  common- 
wealth. It  has  also  been  urged  that  it  is  difficult,  if  not  impossible,  to 
make  proof  of  the  unreasonableness  of  railroad  charges.  Several  plans 
have  been  proposed  to  remove  this  objection. 

The  House  of  Representatives  of  the  United  States  proposed  a  law 
by  which  nine  commissioners  were  to  guess  at  the  rates  which  should 
be  considered  reasonable.  I  say  guess,  because  it  would  be  entirely 
impossible  for  nine  men  to  ascertain  what  are  reasonable  rates,  upon 
correct  principles,  for  all  roads  in  the  United  States. 

The  legislatures  of  some  states  have  adopted  arbitrary  tariffs,  which 
are  to  be  considered  reasonable  until  proved  otherwise.  The  object 
of  these  measures  is  simply  to  throw  the  burden  of  proof  as  to  the 
reasonableness  of  transportation  charges  upon  the  railroad  companies. 

F 


42  RAILROAD  TRANSPORTATION. 

But  in  so  doing  it  raises  fictitious  issues;  it  declares  certain  things 
reasonable  which  are  not  so,  and  makes  an  untruth  the  basis  upon 
which  a  legal  action  is  to  be  brought. 

It  is  difficult  to  perceive  why  all  this  complicated  machinery  was 
invented  to  reach  an  object  that  can  be  simply  reached  by  enacting  a 
law  which  shall  throw  at  once  the  burden  of  proof  upon  the  railroad 
companies.  Such  a  law  would  be  perfectly  just  and  proper.  It  is  the 
business  of  the  common  carrier  to  know  when  he  establishes  a  tariff 
that  it  is  in  accordance  with  the  requirements  of  law;  and  having  all 
the  facts  bearing  upon  the  question  in  his  possession,  he  should  have 
no  difficulty  in  making  the  proof. 

A  rigid  and  frequent  application  of  the  law  as  above  suggested  to 
railroad  carriers  would  soon  prove  whether  the  many  complaints  made 
are  based  upon  facts  or  upon  fiction.  The  judicial  investigation  in  a 
number  of  cases,  aided  by  the  testimony  of  experts  in  railroad  manage- 
ment, would  soon  bring  to  light  and  establish  the  proper  principle 
upon  which  questions  as  to  extortionate  rates  and  unjust  discrimina- 
tions should  be  decided ;  and  it  would  not  be  long  before  people  would 
learn  to  understand  and  look  upon  the  subject  in  its  proper  light. 

The  present  persecution  of  railroads,  which  in  some  parts  of  the 
country  has  become  a  mania,  is  not  unlike  the  persecution  of  witch- 
craft in  former  years.  It  must  cease  as  soon  as  intelligence  has  taken 
the  place  of  ignorance.  When  this  point  has  been  reached  many  of 
the  supposed  difficulties  of  the  railroad  problem  will  be  solved. 

It  has  been  with  a  view  of  contributing  something  toward  this 
desirable  end  that  I  have  discussed  the  subject  in  this  report  at  so 
great  length. 

CONTENTS   OF   TABLES    OF   ANNUAL   REPORT. 

I  propose  now,  after  having  referred  to  the  subject  of  railroad 
transportation  in  general,  to  complete  the  report  of  the  operations 
of  the  Louisville  &  Nashville  Railroad  during  the  past  year.  The 
contents  of  tables  I  to  XXV,  relating  to  the  expenditures,  were 
referred  to  on  pages  8  to  17.  I  wish  now  to  refer  to  the  remaining 
tables,  from  XXVI  to  XLV,  containing  information  in  regard  to  the 
tonnage  and  number  of  passengers  transported,  and  the  revenue  derived 
therefrom,  and  showing  also  the  sources  from  which  the  business  is 
derived,  character  of  the  freight,  etc. 


Table  XXVI  shows  the  number  of  tons  and  ton-miles  of  local  and 
through  freight  transported  ;  the  total  revenue  received  from  freight; 
also  the  revenue  and  the  operating  expenses  per  ton-mile  on  each  road. 

Table  XXVII  shows  the  number  of  tons  of  freight  transported  to 
and  from  each  station,  and  the  number  of  tons  carried  one  mile. 

Table  XXVIII  shows  the  quantity  and  kind  of  freight  forwarded 
from  each  station. 

Table  XXIX  shows  the  total  quantity  of  each  kind  of  freight  for- 
warded from  all  stations  of  each  road  during  the  past  and  preceding 
years. 

Table  XXX  shows  the  quantity  and  kind  of  freight  received  at 
each  station. 

Table  XXXI  shows  the  quantities  and  kind  of  freight  received  at 
Louisville  from  each  station  on  the  various  roads. 

Table  XXXII  shows  the  total  quantity  of  each  kind  of  freight 
received  at  Louisville  during  the  past  and  preceding  year. 

Table  XXXIII  shows  the  quantity  and  kind  of  freight  forwarded 
to  each  station  of  the  road  from  Louisville. 

Table  XXXIV  shows  the  quantity  of  each  kind  of  freight  for- 
warded from  Louisville  during  the  years  1872-3  and  1873-4. 

Table  XXXV  shows  the  number  of  bales  of  cotton  carried  to  and 
from  Memphis,  and  from  stations  on  Memphis  &  Ohio  Railroad. 

Table  XXXVI  shows  the  revenue  from  freight  and  passengers  at 
each  station  of  the  road,  and  the  tons  of  freight  and  number  of  pas- 
sengers carried  one  mile  from  and  to  each  station. 

Table  XXXVII  shows  the  tonnage  of  and  revenue  from  freight 
carried  between  Louisville  and  Nashville,  coming  from  or  destined  to 
Louisville  and  all  points  North,  or  coming  from  or  destined  to  Nash- 
ville and  all  points  South. 

Table  XXXVIII  shows  the  tonnage  of  and  revenue  from  freight 
carried  between  Louisville,  Memphis,  and  all  junction  points  on  the 
Memphis  Line,  arriving  from  and  destined  to  Louisville,  Memphis, 
and  points  beyond. 

Table  XXXIX  shows  the  tonnage  and  revenue  from  freight  com- 
ing from  and  going  to  points  between  Louisville  and  Montgomery  and 
junction  points. 

Table  XL  shows  the  tonnage  and  revenue  from  freight  between 
Nashville  and  Montgomery. 


' 


44  RAILROAD  TRANSPORTATION. 


The  preceding  tables  contain  full  information  in  regard  to  the 
competitive  freight  business,  the  sources  from  which  derived,  and  its 
value  to  the  company.  The  rates  at  which  each  separate  class  of  busi- 
ness is  carried  and  the  net  profits  derived  from  each  can  be  ascer- 
tained, and  the  question  decided  how  profitable  it  is  to  the  company 
or  when  it  ceases  to  be  so. 

Table  XLII  shows  the  number  of  miles  traveled  by  local  and 
through  passengers,  and  the  average  revenue  per  mile. 

Table  XLIII  shows  the  number  of  local  passengers  on  Main  Stem 
and  branches,  and  revenue  derived  from  same  on  each  road.  This 
table  shows  the  interchange  of  local  passenger  traffic  between  the 
various  roads. 

Table  XLIV  gives  the  same  information  in  regard  to  both  local 
and  through  passenger  traffic. 

Table  XLV  shows  the  proportion  of  revenue  derived  from  freight 
business  upon  each  road  originating  upon  the  other  roads. 

ESTIMATES   OF   THE   VALUE   OF   BRANCH   ROADS   TO    MAIN   LINE. 

From  tables  XLIV  and  XLV  we  are  enabled  to  make  estimates 
of  the  value  of  the  branch  roads  and  extensions  of  the  main  line 
as  feeders  to  it.  One  of  the  principal  feeders  is  the  Memphis  Line. 
Its  business  passes  over  ii8  miles  of  the  Main  Stem. 

From  Table  XLIV  it  appears  that  the  gross  earnings  of  the 
Main  Stem  from  passenger  business  coming  from  or  going  to  the 
Memphis  Line  are  $145,995.40.  At  29.13  per  cent  the  net  earnings  of 
the  Main  Stem — its  total  net  earnings  on  account  of  this  business — 
were 42,528  46 

From  Table  XLV  it  appears  that  the  gross  freight 
earnings  on  the  Main  Stem  derived  from  that  line  were 
$368,588.69,  and  net  earnings,  39.20  per  cent 144,486  76 

Total  net  earnings  derived  on  Main  Stem  from  busi- 
ness  of  the  Memphis  Line $187,015.12 

The  value  of  the  Nashville  &  Decatur  and  South  &  North  Alabama 
Railroads  to  the  Main  Stem  as  feeders  may  be  estimated  as  follows : 

Table  XLIV  shows  the  gross  passenger  earnings  on  the  Main  Stem 
derived  from  business  on 

Nashville  &  Decatur  Railroad I9>537  36 

South. &  North  Alabama  Railroad 28,673  04 

Total $48,210  40 


RAILROAD  TRANSPORTATION.  45 

As  no  extra  trains  are  run  on  the  Main  Stem  to  accommodate 
this  passenger'  business,  the  whole  of  this  may  be  considered  as  net 
earnings. 

The  gross  earnings  from  freight  business  on  the  Main  Stem 

Coming  from  or  going  to  the  Nashville  &  Decatur  Railroad  are 52,763  73 

From  Soutli  and  North  Alabama  Railroad 223,691  28 

;55276,455  01 

And  the  net  earnings  from  this  business  (39.20  per  ct.),  ^108,370.36. 
The  total  net  earnings  of  Main  Stem  increased  by  these  two  roads 
are  $156,580.76. 

The  value  of  the  Knoxville  and  Richmond  Branches  as  feeders  to 
the  Main  Stem  may  be  estimated  as  follows : 

Proportion  of  gross  passenger  earnings  on  Main  Stem  from  business 
coming  from  or  going  to  these  two  branches  (Table  XLIV)  on 
^536,937.42  at  29.13  per  cent  net  profit  is iO)7S9  87 

Proportion  of  gross    freight   earnings   (Table   XLV),  $102,279.47,  at 

39.20  per  cent 40,093  55 

Total  net  earnings  on  Main  Stem  derived  from  business  of  these  two 

branch  roads , 50,853  42 

Add  this  to  the  net  earnings  of  these  two  branches 86,563  14 

The  total  net  earnings  of  these  two  branches $137,416  56 

The  value  of  the  Bardstown  Branch  as  a  feeder  to  the  Main  Stem 
is  as  follows : 

Main  Stem  proportion  of  passenger  earnings  (Table  XLIV),  $10,775.53, 

at  29.13  per  cent 3,138  91 

Freight  earnings  (Table  XLV),  $16,915.65,  at  39.20  per  cent 6,630  93 

9,776  84 
Add  to  this  the  net  earnings  of  the  Bardstown  Branch  itself. S>338  06 

Total  net  earnings $15,107  90 

The  value  of  the  Glasgow  Branch  as  a  feeder  to  the  Main  Stem  is 
as  follows : 

Proportion  of  passenger  earnings  on  the  Main  Stem  from  business  from 

the  Glasgow  Branch  (Table  XLIV) 12,181  08 

No  additional  trains  are  run  to  accommodate  this  business,  and  the  whole 
amount  may  be  considered  as  net  earnings. 

Proportion  of  freight    earnings,  as  per  Table  XLV,  $28,843.68;    net 

profit  39.20  per  cent 11,306  72 

Total $23,487  80 


46  RAILROAD  TRANSPORTATION. 

Recapitulating  the  results  of  the  above  estimates,  we  have  the  pro- 
portion of  the  net  earnings  which  the  Main  Stem  has  derived  from 
the  business  of  the  extension  and  branches  as  follows : 

From  Memphis  Line 187,015  22 

From  Nashville  &  Decatur  and  South  &  North  Alabama  Raih-oads 156,580  76 

From  Knoxville  and  Richmond  branches 5°'853  42 

From  Bardstown  Branch 9.769  84 

From  Glasgow  Branch ",306  72 

Total 415.525  96 

The  total  net  earnings  of  the  Main  Stem  were 896,244  64 

Showing  that  without  the  branch  roads  and  extensions  the  net  revenue 

of  the  Main  Stem  would  have  been  only $480,718  68 

But  we  must  consider  that  in  the  above  estiinate  of  the  net  earn- 
ings we  have  only  taken  the  average  net  earnings.  The  large  amount 
of  business  thrown  on  the  Main  Stem  by  these  feeders  has  greatly 
reduced  the  operating  expenses.  The  reduction  so  made  may  be 
estimated  as  follows: 

The  operating  expenses  on  the  Main  Stem  were  63.8  per  cent 
of  the  gross  earnings.  The  operating  expenses  on  account  of  the 
$415,525.96  net  earnings  derived  on  the  Main  Stem  from  the  busi- 
ness  of    the   branch   roads    can    therefore   be   estimated    at   ||;|  X 

$4i5>525-96  =  $732,335-8i- 

Twenty  per  cent  of  these  expenses  belong  to  that  class  which  are 

fixed  and  independent  of  the  amount  of  business  (see  Table  A,  p.  20, 
interest  excluded),  so  that  without  the  business  that  was  brought  to  the 
Main  Stem  by  its  feeders  the  expenses  of  transacting  the  other  business 

would  have  been  increased  by  $732,335.81  XyV^'o 146,467   16 

Add  to  this  the  net  earnings  as  above  estimated 415,525  96 

We  have  the  total  net  earnings  of  the  Main  Stem  on 

account  of  the  branch  roads  and  extension $561,993  12 

This  estimate  shows  that  branch  roads  and  extensions,  although 
they  may  not  be  profitable  in  themselves,  may  become  so  by  the  influ- 
ence they  exercise  upon  the  net  revenue  of  the  main  line.  It  may 
occur  even  that  a  whole  system  of  roads — main  line  and  branches — 
is  not  remunerative,  yet  the  final  financial  result  that  must  be  con- 
sidered the  test  of  the  judiciousness  of  the  investment  in  branch 
roads — the  proportion  of  the  net  revenue  to  the  capital  invested — may 
be  greater  with  than  without  the  branches.  It  is  therefore  not 
possible  to  judge  correctly  of  the  judiciousness  of  such  investments 
unless  correct  estimates  can  be  made  showing  the  net  earnings  directly 
and  indirectly  obtained  on  account  of  branch  roads  and  extensions. 


RAILROAD  TRANSPORTATION.                                  47 

HEADING  OF  ACCOUNTS. 

FROM  TABLES 

1  AND  in. 

MAINTENANCE  OF  ROADWAY  AND 

« 

GENERAL  SUPERINTENDENCE. 

Road  Repairs  per  Mile  of  Road — 

I         Adjustment  of  track. 

35 

Total  per  train  mile. 

2         Ballast. 

36 

Stationery  and  printing. 
Telegraph  expenses. 

3         Ditching. 

37 

4         Culverts  and  cattle-guards. 

38 

Depot  repairs. 

5         Extraordinary  repairs — slides,  etc. 

39 

Total  per  train  mile. 

6         Repairs  of  hand  and  dump-cars. 

40 

Total  station  expenses  per  train  mile. 

7         Repairs  of  road  tools. 

8         Road  watchmen. 

9        General  expense  of  road  department. 

MOVEMENT  EXPENSES  PER  TRAIN"          | 

10        Total. 

MILE. 

II         Cross-ties  replaced — value. 

12         Cross-ties,  labor  replacing. 

41 

Adjustment  of  track. 

13         Cross-ties,  train  expenses  hauling. 

42 

Cost  of  renewal  of  rails — value. 

14        Total  cost  of  cross-ties  per  mile  of  road. 

43 

Labor  replacing  rails. 

15     Bridge  superstructure  repairs. 

44 

Train  expenses  hauling  rails. 

16     Bridge  watchmen. 

45 

Joint  Fastenings. 

17     Shop-building  repairs. 

46 

Switches. 

18     Water-station  repairs. 

47 

Total  cost  of  adjustment  of  track  and  re- 

19    Section-house  repairs. 

placing  rails  per  train  mile. 

20     Total  cost  of  bridge  and  building  repairs 

48 

Locomotive  repairs. 

per  mile  of  road. 

49 

Oil  and  waste  used  on  locomotives. 

21     General  superintendence  and  general  ex- 

50 

Watching  and  cleaning. 

pense  of  operating  department. 

51 

Fuel  used  in  engine-house. 

22     Advertising  and  soliciting  passengers  and 

52 

Supervision  and  general  expense  in  engine- 

freight. 

house. 

23     Insurance  and  taxes. 

53 

Engineers  and  firemen's  wages. 

24     Rent  account. 

54 

Total  engine  expenses  per  train  mile. 

25     Total  per  mile  of  road. 

55 

Conductors  and  brakcmen. 

26     Salaries  of  general  officers. 

56 

Passenger-car  repairs. 

27     Insurance  and  taxes  and  general  expense. 

57 

Sleeping-car  repairs. 

28     Total  per  mile  of  road. 

58 

Freight-car  repairs. 

29     Total  cost  per  mile  of  road  for  tiiainte- 

59 

Oil  and  waste  used  by  cars. 

natice  of  roadway  and  buildings. 

60 

Labor  oiling  and  inspecting  cars. 

29^  Total  cost  per  train  mile  for  maintenance 

61 

Train  expenses. 

of  roadway  and  buildings. 

62 

Total  car  expenses  per  train  mile. 

63 

Fuel  used  by  locomotives. 

Water  supply. 

Total  fuel  and  water  expense  per  train  mile. 

STATION  EXPENSES  PER  TRAIN  MILE. 

64 

65 

30     Labor  loading  and  unloading  freight. 

66 

Damage  to  freight,  and  lost  baggage. 

31     Agents  and  clerks. 

67 

Damage  to  stock. 

32     Gen'l  expense  of  stations — lights,  fuel,  etc. 

68 

Wrecking  account. 

33    Watchmen  and  switchmen. 

69 

Damage  to  persons. 

Expense  of  S^uitc/tin^—Eng'mc  repairs. 

70 

Gratuity  to  employees. 

Engineers  and  firemen's  wages. 

71 

Fencing  burned. 

Expense  in  engine-house. 

72 

Law  expenses. 

34- 

Supervision  and  general  expense. 

73 

Total  per  train  mile. 

Oil  and  waste. 

74 

Total  movement  expenses  per  train  mile. 

Water  supply. 

75 

Grand  Total  for  maintenance  and  move- 

Fuel. 

ment  per  train  mile. 

48 


RAILROAD  TRANSPORTATION. 


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